Recording and Reporting Transactions with Short-Term, Interest-Bearing Note Receivable

On April 1, 2020, Welsch Company sold merchandise to Customer Rodriguez for $18,000, terms 2/10, n/30. Because of nonpayment by Rodriguez, Welsch received an $18,000, 10%, 12-month note dated May 1, 2020. The stated rate and the market rate are equal. The companys annual reporting period ends December 31. Customer Rodriguez paid the note in full, plus cash interest, on its maturity date.

Required

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a. Prepare all entries for Welsch related to the above transactions, including any year-end adjustments. Welsh uses the gross method for cash discounts. Date Account Name Dr. Cr. April 1, 2020 Accounts Receivable 18,000 0 Sales Revenue 0 18,000 May 1, 2020 Note Receivable 18,000 0 Accounts Receivable 0 18,000 Dec. 31, 2020 Interest Receivable OX 0 Interest Revenue 0 0 x OX O April 30, 2021 Cash Note Receivable 0 18,000 Interest Receivable 0 OX Interest Revenue 0 OX b. Show what should be presented on the 2020 income statement and balance sheet. Income Statement, 2020 Sales revenue $ 18,000 Interest revenue $ OX Balance Sheet, December 31, 2020 Note receivable $ 18,000 Interest receivable $ OX