Reference no: EM133028648
Problem - Recording Note Transactions - The following information is extracted from Tara Corporation's accounting records:
May 1 Received a $6,000, 12%, 90-day note from V. Leigh, a customer.
May 6 Received a $9,000, 10%, 120-day note from C. Gable, a customer.
May 11 Sold the Leigh and Gable notes with recourse at the bank at 13%. In addition, borrowed $10,000 from the bank for 90 days at 12%. The bank remits the face value less the interest. The estimated recourse liability for Leigh and Gable is $84 and $110, respectively.
July 31 The July bank statement indicated that the Leigh note had been paid.
Aug. 10 Repaid the $10,000 borrowed on May 11.
Sept. 4 Received notice that Gable had defaulted on the May 6 note. The bank charged a fee of $10. Paid the amount due on the Gable note to the bank. Informed Gable to pay Tara the entire amount due plus 11% interest on the total of the face amount of the note, the accrued interest, and the fee from the maturity date until Gable remits the amount owed.
Sept. 23 Received the amount due from Gable.
Required - Prepare journal entries to record the preceding information, assuming that Tara usually does not sell its notes. (Assume a 360-day year for the purposes of computing interest and round all calculations to the nearest penny.).