Assume That on December 13,2017,Royal Company Sells a Computer to Savco

question 162

Essay

Assume that on December 13,2017,Royal Company sells a computer to Savco Corp.at an invoice price of $25,000.Because Savco is short of cash,it gives Royal a 90-day,12% promissory note.(Assume a 360-day year for interest calculations. )
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Required
1)What is the total amount of interest that will be due on the maturity date?
2)What adjustments will Royal make to record receipt of the note?
3)If Royal has a December 31 year-end,what adjusting journal entry is needed to record interest due but not yet received?
4)How much interest will Royal earn in 2017?
5)On what day will the note mature?
6)What adjustments will Royal record on the maturity date?

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Definitions:

Kilowatt-hours

A unit of energy equivalent to one kilowatt of power expended for one hour, commonly used to measure electricity consumption.

Fixed Costs

Fixed charges that stay steady irrespective of the amount of goods produced or sold, such as property leases, payroll, and indemnity costs.

Peak-period Capacity

The maximum output level that a company can sustain during the busiest period without increasing long-term fixed costs.

Machining Department

A specialized sector within a manufacturing facility where metal is cut, shaped, and finished using machine tools.