Recording Notes Receivable: Issuance, Payment, and Default

Teatree Products permits its customers to defer payment by giving personal notes instead of cash. All the notes bear

interest and require the customer to pay the entire note in a single payment $6$ months after issuance. Consider the

following transactions, which describe Teatree's experience with two such notes:

a$.$ On October $31,$ Teatree accepts a $6-$month, $12\%$ note from Customer A in lieu of a $$3,600$ cash payment for

services provided that day.

b$.$ On February $28,$ Teatree accepts a $6-$month, $$2,600,12\%$ note from Customer B in lieu of a $$2,600$ cash payment

for services provided on that day.

c$.$ On April $30,$ Customer A pays the entire note plus interest in cash.

d$.$ On August $31,$ Customer B pays the entire note plus interest in cash.

Required:

Prepare the necessary journal and adjusting entries required to record Transactions a through d in Teatree's records. If

an amount box does not require an entry, leave it blank.

a$.$ Oct. $31$

Dec. $31$

b$.$ Feb. $28$

c$.$ Apr. $30$

d$.$ Aug. $31$