REMEMBER: Two reasons for accepting a note from a customer are (1) as a promise of payment on a credit purchase and (2) to grant a time extension on an amount owed on an open account. In both cases, the customer's note is recorded in a notes receivable account. Use the following transactions for Joy's TV and Electronics to demonstrate journal entries for your class 1. June 1: Sold a $2,000 big-screen TV to a customer. The customer was asked to sign a 120-day, 12% note. (Hint: The interest is not recorded until it is earned.) Description Credit Date June 1st TV Debit 2000 Notes Payable 2000 2. Sept. 29: Received payment on the $2,000, 120-day, 12% note. Date Description Debit Credit Cash 2040 Notes Receivable 2000 Interest Revenue 40 3. Oct. 1: Granted a 60-day time extension to S. Greene, who owed $1,000 on account. Ms. Greene signed a 60-day, 15% note for the amount owed. Date Description Debit Credit 4. Nov. 30: Received payment on the $1,000, 60-day, 15% note from S. Greene. Date Description Debit Credit 5. Dec. 1: Granted a 90-day time extension to J. Smith, who owed $800 on an account. Mr. Smith signed a 90-day, 15% note for the amount owed. Date Description Debit Credit NOTE: Assume the accounting period ends on December 31. At that time, 30 days of interest have been earned on the note from J. Smith. The matching principle dictates that any interest earned but not received must be recorded through an adjusting entry. Therefore, an adjusting entry would be made to record 30 days of interest on the $800 note. 6. Dec. 31: Recorded interest earned on the note from J. Smith. Date Description Debit Credit 7. Mar 1: Received payment on the $800, 90-day, 15% note from J. Smith. Date Description Debit Credit