Brief Exercise 7-07 Grouper Family Importers sold goods to Tung Decorators for $33,600 on November 1, 2020, accepting Tung's $33,600, 6-month, 5% note. Prepare Grouper's November 1 entry, December 31 annual adjusting entry, and May 1 entry for the collection of the note and interest

Answer with its Explanation:

The accounting treatment are as under:

The note was issued because the customer required 6 months time to pay along with its interest.

The initial entry would be:

Dr Notes Receivable 33600

Cr Sales Revenue 33,600

When the interest would be due at the end of the note period the interest which is 5% for a year and 2.5% for 6 months.

Dr Interest Receivable 840

Cr Interest Revenue 840

When the cash will be paid the entry would be:

Dr Cash 34,440

Cr Notes Receivable 33,600

Cr Interest Receivable 840