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.)