On march 1, terrell & associates provides legal services to whole grain bakery regarding somerecent food poisoning complaints. legal services total $11,000. in payment for the services, wholegrain bakery signs a 9% note requiring the payment of the face amount and interest to terrell & associates on september 1.

required:
for terrell & associates, record the acceptance of the note receivable on march 1 and the cashcollection on september 1.

The Journal entries are as follows:

(i) On march 01,

Legal service expenses a/c  Dr. $11,000

To notes payable A/c                                $11,000

(To record the acceptance of the note receivable)

(ii) On September 1,

Notes payable a/c     Dr. $11,000

Interest expense a/c Dr. $495

To cash a/c                                    $11,495

(To record the cash collection)

Workings:

Interest expense = 11,000 × 9% × (6 ÷ 12)

                            = $495

month 1 start amount =$3287.90 interest=(3287.90x0.0145/12)3.97 total to pay=$3291.81 paid =$1200 balance =$2,091.87

month 2 starting amount= $2,091.87 interest =$25.28 total to pay =$2117.15 paid =$1200 balance $917.15

month 3 starting amount =$917.15 interest =$11.08 total to pay =$928.23 paid =$928.23 balance =$0 total to pay 1200+1200+928.23 = $3328.23 it will take 3 months to pay a total of $3328.23