Cypress Oil Company's December 31, 2013, balance sheet listed $645,000 of notes receivable and $16,000 of interest receivable included in current assets. The following notes make up the notes receivable balance:
Note 1 Dated 8/31/2013, principal of $300,000 and interest at 10% due on 2/28/2014.
Note 2 Dated 6/30/2013, principal of $150,000 and interest due 3/31/2014.
Note 3
$200,000 face value noninterest-bearing note dated 9/30/2013, due 3/31/2014. Note was issued in exchange for merchandise.
The company records adjusting entries only at year-end. There were no other notes receivable outstanding during 2013.
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To determine the balances of the notes receivable and interest receivable at year-end, we need to calculate the accrued interest for each note and add it to the principal.
1. Note 1:
- Principal: $300,000
- Interest rate: 10%
- Date issued: 8/31/2013
- Due date: 2/28/2014
To calculate the accrued interest on Note 1, we need to determine the number of days between the date issued and the end of the year (12/31/2013) and multiply it by the interest rate.
Days between 8/31/2013 and 12/31/2013 = 122 days
Accrued Interest for Note 1 = Principal ($300,000) × Interest rate (10%) × Time (122/365)
2. Note 2:
- Principal: $150,000
- Interest rate: Not stated
- Date issued: 6/30/2013
- Due date: 3/31/2014
Since the interest rate is not stated for Note 2, we need additional information to calculate the accrued interest. Without this information, we cannot determine the amount of accrued interest for Note 2.
3. Note 3:
- Face value: $200,000
- Interest-bearing: No
- Date issued: 9/30/2013
- Due date: 3/31/2014
Since Note 3 is noninterest-bearing, there will be no accrued interest for this note. The principal of $200,000 remains unchanged.
After calculating the accrued interest and adding it to the principal for each note, we can determine the total balance of the notes receivable at year-end.
Interest Receivable = Accrued Interest for Note 1 + Accrued Interest for Note 2 (if available)
Notes Receivable Balance at Year-End = Principal of Note 1 + Principal of Note 2 + Principal of Note 3 + Interest Receivable
Please provide the missing information for Note 2 to determine the complete year-end balances.
To find the balance of the notes receivable and interest receivable included in the current assets on Cypress Oil Company's December 31, 2013, balance sheet, we need to analyze the information provided. Here are the steps to determine the balance:
Step 1: Identify the notes receivable and interest receivable included in the current assets.
According to the information provided, the notes receivable and interest receivable are listed separately as $645,000 and $16,000, respectively.
Step 2: Break down the notes receivable balance by each note.
The information gives us details about three specific notes:
Note 1: Dated 8/31/2013, principal of $300,000, and interest at 10% due on 2/28/2014.
Note 2: Dated 6/30/2013, principal of $150,000, and interest due 3/31/2014.
Note 3: $200,000 face value noninterest-bearing note dated 9/30/2013, due 3/31/2014. The note was issued in exchange for merchandise.
Step 3: Calculate the principal and interest amounts for each note.
For Note 1, the principal amount is $300,000, and interest is not due until 2/28/2014, so no interest is receivable as of 12/31/2013.
For Note 2, the principal amount is $150,000, and interest is due on 3/31/2014, so no interest is receivable as of 12/31/2013.
For Note 3, the face value is $200,000, and since it's noninterest-bearing, no interest is receivable.
Step 4: Sum up the principal amounts of all the notes.
The principal amounts for Note 1, Note 2, and Note 3 are $300,000, $150,000, and $200,000, respectively. Adding them together gives us $650,000.
Step 5: Determine the balance of notes receivable.
The balance of notes receivable is $650,000, as calculated in Step 4.
Step 6: Determine the balance of interest receivable included in the current assets.
According to the information given, only Note 1 and Note 2 accrue interest. Since interest is not due as of 12/31/2013 for either of these notes, the balance of interest receivable is $0.
Therefore, the balance of notes receivable included in current assets on Cypress Oil Company's December 31, 2013, balance sheet is $650,000, and the balance of interest receivable is $0.