USA: +1 (725) 712-1730 
Sign in
On June 5, Torres Company received a $7, 200, 75-day, 16% note from Alexander Company in payment of its account. On July 5, Torres Company discounted Alexander Company’s note at the bank at 20%, with recourse. On August 19, the bank notified Torres Company that Alexander Company had dishonored the note. Since the note had been dishonored, the bank deducted the maturity value of the note plus a protest fee of $35 from Torres Company’s account. Journalize Torres Company’s transactions on June 5, July 5, and August 19.
Expert Answer
| Date | Accounts title | Dr | Cr |
| 5-Jun | Notes Receivable | $7,200 | |
| Accounts Receivable-Alexander Co | $7,200 | ||
| 5-Jul | Cash | 7254 | |
| Interest Expense | 42 | ||
| Notes Receivable | 7200 | ||
| Interest revenue | 96 | ||
| Now calculate maturity value of note | |||
| 7200+(7200*16%*75/360) | 7440 | ||
| Calculation of bank discount | 186 | ||
| 7440*20%*(75-30)/360 | |||
| Interest earned by Torres | 96 | ||
| 7200*16%*30/360 | |||
| Now | |||
| Maturity value | 7440 | ||
| Discount | -186 | ||
| Discounted value of note | 7254 | ||
| Calculation of interest expense | |||
| Note face value+Interest revenue (7200+96) | 7296 | ||
| Discounted value of note | -7254 | ||
| Interest expense | 42 | ||
| 19-Aug | Notes Receivable | 7440 | |
| Interst expenses/legal fees | 35 | ||
| Cash | 7475 | ||
