[Learningforgood]

On April 1, 2010, Tabor Co. received a $6,000 note from a customer in settlement of a $6,000 account receivable from that customer. The note bore interest at the rate of 15% per annum, and the note plus interest was payable March 31, 2011.

Required:
Show the effects (+ for addition and − for subtraction) of each of these transactions and adjustments.

a. Receipt of the note on April 1, 2010. (two entries required)
b. The accrual of interest at December 31, 2010.(two entries required)
c. The collection of the note and interest on March 31, 2011.(three entries required)

I really can't understand the first sentence and what it really means. It's complicated.

Thanks in advance for your help.

[paraclete]

On April 1, 2010, Tabor Co. received a $6,000 note from a customer in settlement of a $6,000 account receivable from that customer. The note bore interest at the rate of 15% per annum, and the note plus interest was payable March 31, 2011.

A note is a bill of exchange; a promissary note

So effectively the note was a loan for twelve months at an interest rate of 15%

What they want you to do is record these transactions and adjust the accounts at balance date

Interest on notes is calculated on a elapsed days basis so between 1 April and 31 December there are a certain number of days and you can calculate the interest due to that date