question archive On June 30, 2021, the Esquire Company sold some merchandise to a customer for $66,000
On June 30, 2021, the Esquire Company sold some merchandise to a customer for $66,000
Subject:AccountingPrice:3.87 Bought7
On June 30, 2021, the Esquire Company sold some merchandise to a customer for $66,000. In payment, Esquire agreed to accept an 8% note requiring the payment of interest and principal on March 31, 2022. The 8% rate is appropriate in this situation.
Required:
1. Prepare journal entries to record the sale of merchandise (omit any entry that might be required for the cost of the goods sold), the December 31, 2021 interest accrual, and the March 31, 2022 collection. (Do not round intermediate calculations.)
2. If the December 31 adjusting entry for the interest accrual is not prepared, by how much will income before income taxes be over-or understated in 2021 and 2022?
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Answer:
| June 30 | Notes Receivable | 66,000 | |
| Sales revenue | 66,000 | ||
| Dec 31 | Interest receivable | 2640 | |
| Interest revenue | 2640 | ||
| (66,000*8%*6/12) | |||
| Mar 31 | Cash | 69,960 | |
| Interest receivable | 2640 | ||
| Interest revenue (66000*8%*3/12) | 1320 | ||
| Notes Receivable | 66,000 | ||
2021 income will be understated by 2640
2022 income will be overstated by 2640
