From the foregoing construct Cash account.
Notes and Drafts
26. Lang is in need of funds. Connelly, an associate of Lang, induces Moore to accommodate Lang. Accordingly, Connelly introduces Lang to Moore, for which Lang pays $500. Moore discounts for Lang a note for $15,000 due in three months and turns over to him $14,500.
Frame journal entries covering their interest.
27. X, a branch, buys from Y. Y draws on X for $2,000 at 60 days. The draft is accepted and is later discounted 40 days from maturity at 6% per annum. In addition to the above acceptances, Y holds a total of $15,000 acceptances from other customers; $12,000 of these are used as collateral for a loan of $10,000 at the bank.
State all necessary entries.
28. A corporation had discounted $25,000 of notes receivable that are not due until December 31, 19—. How should this be dealt with in preparing a balance sheet at November 30, 19—? One of the above notes for $5,000 was not paid at maturity but was protested, the protest fee amounting to $15. The company drew its check for the amount to take up the note.
State the entries required to be made on the books to record the transactions.
29. Previous to examining the accounts of a corporation at the end of its first fiscal year, you find that notes receivable stand in the financial statement prepared for the banker at $5,500.
Upon investigation it is disclosed that $20,000 of notes from customers were received during the period, and that $10,000 of these notes were duly paid in full by the customers to the company at maturity, and $5,000 of the notes were discounted at the bank. Of the notes discounted, a note for $500 given by Brown & Company was not paid when due, and has been charged back to the Notes Receivable account. Notes to the amount of $1,500 are not yet due at the bank.