 In this presentation, we will work a problem on notes receivable and accounts receivable focusing primarily on notes receivable. We will be transferring from accounts receivable to notes receivable giving us a good example of the difference between the two. The information that we will be using is on the left side. We're going to put that information into the worksheets on the right side. This will be used in order to calculate the interest. Then we're going to go over here. We're going to post that information as needed to the general journal out what we'll record that I should say to the general journal. And then post it to a little worksheet here rather than the full general ledger. This worksheet being the beginning trial balance, our adjustments and the ending trial balance. The beginning trial balance being in balance by seeing that the debits are positive numbers, our negative numbers, debits minus the credits if we sum them up is zero, meaning debits minus the credits add up to zero or debits equal the credits. So this zero means we're in balance. Net income is going to be this 20,000 only. So there's the net income of the 20,000. We're eliminating many accounts just focusing in on what we need. We're going to be looking at the accounts receivable here and we'll be looking at these notes receivable, which we are going to break out into a separate note receivable for each receivable that we will be having each client that will have a note receivable. This is a common way to do it. When we put it to the financial statements note, it will all be probably combined together into one category called notes receivable and some companies might just have one category on the trial balance as well and then break it out in a similar way as we do to the subsidiary ledger for accounts receivable, which we'll take a look at in a second to the right, that will just basically be a worksheet breaking out that information and some companies I actually prefer to, if there's not too many of them, to break out the notes receivable into separate accounts so that we can track them on the trial balance and then combine them together on the financial statements into one account or one grouping of accounts called notes receivable. Okay, so here's the accounts receivable here, meaning we are owed $37,500 from customers. If we want the detail of that, we're not going to look at the general ledger in this problem, but that would only give the detail by date. We are going to look at the subsidiary ledger breaking that number out by customer. These are unusual names, but these are the customers, just the simple names here, and these are the people that owe us money, $6,200, $2,120, and if we add all those up, including the other, then it adds up to this $37,500 that matching then that backing up and supporting the accounts receivable account. So now let's go back over and let's see what we have. We're going to start off with the prior year. So we're going to really be working in, starting in February, we're going to jump forward in time. That's just the nature of these types of problems. These are a little bit more difficult in that, for that reason, because in the Accounting Department, they're not things we do from a day to day process. And therefore, when we look at a problem, we're going to jump through the whole year so we can do these calculations of interest. So that's what we'll do. So be aware that when we do this in practice, we're not going to be doing these types of accounts every day. They will be things that we'll have to do when they become due. And we'll start off here with the prior time period, December of the last year, and we'll do some calculations because we want to see what happens in terms of the adjusting entry and just give an example of that. And then we'll move forward into the current year and calculate interest and then pay off the notes receivable. So the first thing is going to be the prior year. We're not going to actually put the journal entry related to this in place. What we're going to do is show how the adjusting entry would be in place and what is the result on the trial balance from it. And then move forward from there. So on 12, 17, we have 60 days, 7% note receivable, giving D company a time extension on pays due accounts receivable. And path is probably to be passed due accounts receivable. So we're going to give them an extension on 12, 7. So what happened is they had accounts receivable. They didn't pay us for whatever reason. We gave them an extension of time, but now they have to pay us interest for that extension of time. So we're going to calculate the interest then using this little worksheet here. So this will calculate the interest. We're going to say that we had 1000 or 14,100 principal, 7% interest. Because it's formatted here already, I can just type 7 is a 7%. If we were to use a trustee calculator, I would typically say 14, 100 times 0.07. 7% 0.07 will make a percentage 7%, 987. That percentage, by the way, is in the home tab in the numbers group and percentage. So if the cell does something funny, always check the type of formatting of that cell. We will then multiply this out. I'm going to take this number times that number, do that with a formula in Excel by saying equals pointing to that 14,100, multiplying times that 7%, or C7 times C8, and enter. That gives us the 987. Then I'm going to divide that by the number of days in a year. We're going to make this nice and even. Notice that we could say there's two months, 60 days to about two months. We're going to say how many days are in a year. And the reason we're doing this is because the 7% means 7% a year. We only have a 60-day time period. So we don't usually talk in terms of months. We don't usually say, what's the 60-day interest rate? Because the rate would be really small that way. So the convention that we use whenever we say interest typically means interest for a year, which we then have to calculate out the interest for a whatever time period we're using, and in this case, 60 days. So if this is going to be the interest we would have to pay if it were for an entire year, how can we break it out to 60 days? I'm going to break it out into a daily interest rate and then multiply times 60 days. The way to do that is to say this equals how many days in a year? You would say 365. I'm going to make it even, which is 12 months times 30. So we're going to assume, in other words, all months have 30 days rather than 28 or 30 or 31 and enter. So then we got the 360. Now we're going to take the interest divided by the number of days. So this equals this 987 interest per year divided by 360 days gives us two and 74 cents per day. Then we're just going to multiply that times that 60 days. So 60. And we'll take that 274 times the 60 by same equals pointing to that 274 in C11 multiplying times that 60 in C12, giving us the 164.50. Now I'm just going to round that by putting that same number into this cell with a formula equals this 164. It just took off the 50 cents Y and added it 165 instead of 164.50. How? By going to the home tab numbers. And I just took off the decimal. So note that Excel still sees it as 164.50 but shows the 165 in this cell. So be careful with rounding. So that's going to be this calculation. Now note we could have got to the same number of a couple different ways. And you may see these other different ways. You might think that this calculation is a little long, but it works. And I think it's the easiest way to kind of see this. You could do it with months, however, as well. This problem probably works best with days. But just note you'll see it in different ways. So I mean we could say if there's 987 interest per year and there's 60 days, that's two months. So instead of breaking it by day, let's break it out by the number of interest per month or divided by 12 months in a year, 82.25 for 12 months. And each month, I'm sorry, each month times two for 60 days, two months, 30, 30, 60. So that would give us the 164.50. So another way we can calculate it, we can also take the ratio. So we could take the 60 days divided by 360 or the 0.1666, which is the same as saying if we said there's two months divided by 12 months, the point once that same 0.166 times the interest for the entire year, the 974 times 987, that's going to be that 164. So we're really just using a ratio to me to do that ratio calculation, isn't as intuitively easy to think about as breaking out the interest per day or per month and then multiplying times the number of months or days we are using. Now, that would be the interest for the entire year. What we want to have now is the interest as of the cutoff date because we're going to say that we're doing the financial statements as of 12.31 and we've earned interest that we have not yet received and therefore we need to record that fact as of the end of the time period. So even though we're not going to get paid for 60 days, we only have a few days, half a month or so, to get to that 31 days. So let's do the same calculation one more time, but now just calculate till the end of the year. So it's going to start off the same, 1714.100 times 7%, just going to do this again. This would be interest for a year, remember. This cell, which is d7 times the 7%, gives us the interest, but that's interest for the entire year. We're only looking for like half a month and then we're going to divide that by the number of days in a year which equals 12 times 30, 12 months times 30 days or 360. There's really 365, we're rounding to 360. If we divide that out, we're going to say equals to 987 divided by the 360, gives us the interest per day to 74, same calculation we just did. However, instead of 60 days, we only have a few days till the 31st. Now we're going to be a little bit more exact here and try to get the exact number of days. We could count it out on her fingers, right, 17, 17, 18, 19, 20, 20, or do a subtraction problem which would look something like equals 31 minus 17. And that would not include the day 17 and I'm going to include it, so we're going to say plus one. And if you're looking at a problem that breaks it down to a day or so, that's probably going to be where the difference may be at if you're off by a little bit. Then it may be that you're not including or are including that day. You want to be careful with that. That could be where the difference is. Okay, then we're going to multiply this out. This equals to 274 times this 15 days. And then I'm going to round it just again just by putting that same cell down here which is already formatted for us in order to take off the 13 cents or equals that 41.13. So $41 about is the interest. What that means is that we're going to earn $41 as of the end of the year, the end of December 31st of the 165 that we're going to get paid at the end of 60 days. So we earned $41 as of the end of the year. We haven't yet got paid for it. We have recorded the journal entry for it. Let's take a look at it. So if we go to the trial balance, we can see that we have this $41 in interest receivable. Why? Because at the end of last year, what happened is we said that people owe us money that we haven't received yet for the receivable for what we've earned on it for those a couple days. We earned it already by loaning the money out. So we debited the interest receivable and we credit interest revenue. Why isn't there anything in interest revenue? Because the interest revenue has been closed out to retained earnings as of the end of last year. And so this year, it's not there because it closed out and we're starting with a zero balance. So now we're going to go into the current year. We're going to jump to the current year and we're going to record some of these transactions. Now we're in the current year. We're going to record this stuff out. So on 214, receive payment from the company of both principal and interest. Make sure to take into account the interest receivable on the trial balance. Okay, so now we're going to say that they paid us. So here's that they paid us to 14100 plus the full 165. So let's see what the journal entry would look like then. We're going to go back over here. We can ask our questions we would typically ask and that would include is cash affected? I'm going to put the date here, which is 214. We're going to say, yeah, we got cash. Cash is going up. Cash has a debit balance. We're going to make it go up by doing the same thing to it in this case. Another debit. So I'm going to copy cash, right-click and copy. Put that up in J5, right-click and paste 123. Now the amount's going to be, if I scroll back over, the 14100 plus the 165, the full amount of interest for the entire time period. We already earned this over here. We haven't received it, however. So the 141 plus the interest 165. I'm going to scroll back over here so if I did that way too fast, I'm going to say this equal. You don't want to forget the number, 14100 plus the 165. And there's the 14265, 14265. That's how much we're going to get. Now we've got to take it off the books, meaning this note receivable. That's what's received. It's only 141 because it doesn't show the interest yet. Part of the interest is shown here, but not all of it. But in any case, this needs to go off the books. It's a debit balance. We need to make it go down by doing the opposite thing to it, which in this case is a credit. So I'm going to copy that. We're going to paste that in J6, right-click and paste 123. It's already indented here for us. I'm going to leave that. We're going to go over here. I'm going to put the credit to represent the credit with a negative 14100. Then we have this interest receivable. We just saw that on the books. We need to take that off. That represents the receivable for what was earned last time period of the 165 interest. So we need to take that off the books because it's now been received. And it's 41. It's a debit balance. We need to do the opposite thing to it to make it go down, which is a credit. So we're going to copy this in S13, right-click and copy. Put that in J7, right-click and paste 123. The amount is going to be in the credit side in L7. We're going to put negative 41. So there we have that. Now the rest of it then is going to be the interest receivable. That'll be the difference. We could think of it as the 165 minus the 41. But this interest receivable is what we recorded as we earned before. Or we can just take the difference between the whole thing, the debit minus the credit, should be that same difference. So let's do that plug formula first. I'm going to use a plug formula by saying negative sum. And then just highlight this whole thing. This is a positive number. These are negatives. The positive minus the negative. And then flip the sign. That's why there's a negative sum. So we're going to take these two numbers, in other words, 14141 minus the 14265. Now we could have taken 165 minus the 41 gives us that same 121, meaning total interest was 165, 41 if it was earned last time period, 124 then earned this time period. That then is going to go to the current income statement account of interest receivable. Interest receivable is a credit balance account. It being revenue, it always goes up in credit direction as is happening here. We're going to right click and copy. We're going to paste that in J8. Right click and paste 123. Now we're going to record this out, not to the general ledger, but to this little worksheet because this is a perfect little worksheet for the number of journal entries we'll have to see exactly what is going on. So we'll post this first cash. Cash is there. Cash is here. We're going to post it to U5, U5 equals, point to that 14265, it's going to bring the 25164 up by 14265 to 39 for 29. Then we have the note receivable for decomprenting here. We're going to post it to the note receivable on the trial balance there. We're going to post it in U12. Within U12 we're going to say equals and point to that 14100, bringing the 14100 down in the credit direction to zero. Then we're going to record this interest receivable. We're going to record it here, interest receivable in cell U13. So within U13 we will say equals, point to that 41, bringing the 41 balance down by 4120. Finally we'll post the interest receivable. Note we're out of balance of course by that 124 here until we record the last component. Interest receivable which is here on the trial balance, we are in cell U18. We're going to say equals, point to that 124, bring the balance from zero up by 124 in the credit direction, putting us back in balance. It also brings up net income. So note that net income is increasing by only the interest portion earned this time period although we're receiving the full interest, the 165 of interest, 41 of it having been earned last year, although it had not been received last year. Okay, so we're going to scroll back over and see what we have next, 32127 day note giving MI company and extension on past due accounts receivable. So same idea here, this company owes us money MI and they're not going to pay us yet and we're going to say okay well they're not going to pay us but we're going to charge you interest then moving it from the accounts receivable to the notes receivable, that initial journal entry being a very simple one but then we're going to have to calculate interest on it. In other words, we're going to go back over here, we're going to make a journal entry for this on 32 and we're going to say it's in accounts receivable, here's the 375 people owe us, here's MI in the subsidiary ledger, they owe us 6200 of that 37500. We need to bring that down not because they paid us, not because it's bad debt not because they're not going to pay us but because we're going to transfer it to a note receivable and charge interest for it due to the lateness of the payment. So what we're going to do is there's the accounts receivable, it's going to go down so we're going to do the opposite thing to it which is a credit. So I'm going to copy the receivable, right click and copy, I'm going to put it on the bottom in the credit so I'm going to put it on the bottom in J11, right click and paste, one, two, three. I'm going to put that in the credit column over here, it's going to be for that 6200, I'm going to represent the credit with a negative 6200. Then we're going to have a debit here in K10, within K10, we could just type it in there, I'm going to do a formula loan because that's how I like to do it. So we're going to say negative of that number, it'll take that number, flip the sign, make it a positive. Okay, now we just need to know what that account will be and it will be notes receivable. Note that within the notes receivable, we have a separate note receivable for every company that we have a note for and again like we said before that's a common practice to do to have that in a trial balance, a different account, it won't be that way on the financial statements, it'll be grouped in one account and some companies may only group it in one account on the trial balance, it's up to the company however, it will typically be supported by the subsidiary ledger which we'll put together after we record the journal entry in a similar way as this subsidiary ledger. So note, this subsidiary ledger is for the receivable and this list of accounts is another way of tracking the receivables that are notes receivable by who owes us money whereas we can also have a subsidiary type ledger for the notes receivable which can also be used to calculate the interest that will be due on the notes as we'll see. Okay, so we're going to copy that and that's going to be the debit in GA10, right click and paste 123. Let's record this, here's the notes receivable for MI that we're going to record, here it is on the trial balance and we're going to record that in U9. So within U9 we're going to say equals but we're going to point to that 6,200 bringing that zero balance by 6,202, 6,200 then we're going to record the other side accounts receivable has a credit here, accounts receivable up top here, we're going to record that in the cell U6. So within U6 we'll say equals and point to 6,200 credit bringing that 37,500 down in credit direction by 6,202, 31,100. Now we also want to record this 6,200 on the subsidiary ledger. So remember that they owe us here 6,200 breaking this number out down into who owes us the money. This person no longer owes us the money, the subsidiary ledger does not match at this point in time until we say that this person doesn't owe us, we're basically just posting the same information that same journal entry here. So I'm going to say this equals that 6,200 bringing the 6,200 down by 6,202, zero. Now if we add them all up all the customers that owe us money 3,200, 31,300 is the same as that 31,300 there. No effect on net income from this transaction. This was from the prior transaction. So no effect on net income. All we did was move it from one receivable to another receivable from a more short term receivable to a more long term receivable from an account receivable to a note receivable from a receivable that doesn't charge interest to one which does. Okay, enough of that. We're going to go back over here and we're going to record the interest calculation now. We're not going to do anything with it yet because we haven't earned any interest. This is what we expect to earn in interest over the time period of this note. So we're going to say that it's for 6,200. The rate is 7%. Once again, if I just type in 7, it will be formatted due to the format of Excel found in the home tab, numbers group and the percentage button. So then if we go down here, we multiply this out, the 6,200 times 7% will equals this 6,200 times the asterisk, so C18 times 7% in C19, giving us the 434. Now we're going to break this out into the number of days because remember, 7% means 7% a year, 434 then would be the interest for the entire year. If we have the loan for the entire year, which we do not, we will only have it out for 120 days. So we need to break this out to 120 days rather than interest of a year of 434. So I would think about doing that by first breaking it out into days, which would be 12 months times 30 days or 360. Again, that's an estimate, it would be 365. And then equals this 434 divided by the 360, giving us the $1.24. Note that this could be rounded. And Excel, if I go to the home tab, numbers and increased decimals, it's really not that same number. But as long as we use this cell and the calculation, Excel will use the exact number even though it only shows, I'm going to go in and remove that, the non-exact number. So just be aware of those little tricks in Excel. If you don't use Excel, you may want to use a ratio, which will be more exact. But this will be exact because this cell represents the real number, even though it only shows 121 rounded to the nearest penny. Okay, so then we're going to say that the number of days is going to be 120. And if there's $1.21 for 120 days, we multiply that out. We're going to say these 121 times 120 days gives us 144.67. I'm going to then round that by just putting it in this cell, which is already formatted for us, saying equals that 144.67, rounding it to 145. Okay, so let's do that same calculation a couple different ways just to practice our interest calculation. We could have done this by months. So notice we have a 120-day note. We divide that by 34 months. So we could say, okay, well what if we had this 434 for a year divided by 12 months? Means 36.166 per month times 4. That would give us that same number here. We can also use the ratio calculations that a lot of the textbooks would like to use, which would say that we have 120 days over 360 days or 0.33%, which could also be thought of as 4 months over 12 months, 0.33%. We take that times this interest 434 per year, 434. We get that same 144.67. So a couple ways you can calculate that again. This is the most intuitive way to calculate it to me, but you can see it any different way. You might see it any different way and you kind of got to figure out, you know, your method and reconcile to whatever methods being used and show them. Okay, so we're not going to do anything with this number yet because it's not due yet. We're just going to keep that until it becomes due and then we'll do something with that number. Next, we got 317.30-day 7% note giving a company and extension on-pass due accounts receivable. So same type of thing is happening here. We're going to say that any company scrolling back over and of course it's the same thing that's that problem we're doing here, but this is a company has accounts receivable included in that number become passed due. We're not giving up on it yet. What we're going to do is say a company, we're going to give you a note rather than accounts receivable. We're going to charge interest on the note. So we're just going to move that 3,800 from a receivable to another receivable from accounts receivable to notes receivable. So to do that, we're just going to go over here and we're going to say this is going to be on 317 and we're going to take it out of accounts receivable. This being a debit balance, we're going to make it go down doing the opposite thing to it. A credit. So I'm going to copy the accounts receivable in S6, right click and copy. Put that on the bottom. So we're in J14, right click and paste 1, 2, 3. Then we're going to put the credit. It'll be for how much is it for 3,800 negative 3,800 for the credit. Then we have a debit of something in K13. I'm going to do that by saying negative of that number, taking that number and flipping the sign. We could just type it in there. But I think it's better to use the formula and therefore we'll do so. And then we're going to indent this cell in J14, home tab, alignment, increase indenting. You could double click and just put the space bar three times or not do it at all and it's not a big deal. Okay. And then we just need to know what this account will be. It's going to be notes receivable. Notes receivable for a company is right there. It's still in the green. It's still a receivable. It still has a debit balance. It's going up in the debit direction by doing the same thing to it, another debit. So S11, right click and copy. We're going to put that up top in J13, right click and paste 123. Then we'll post this out. Here's the note receivable. We're going to post that out here. We're going to be in U11. So within U11, we're going to say equals and point to that 3800 and enter. And then in the accounts receivable here, that's going to be up in U6, there's something in it. Before we will double click on it, go to the end of it, say plus, then point to that accounts receivable and enter. Bring the balance down to 27,500. We also need to record it over here in the subsidiary ledger. So there's the accounts receivable. We need to record it here in Y21 to show that a company doesn't owe us the receivable for accounts receivable, but for notes receivable now. So we're going to say equals, point to that 3800 and enter. So now if we go down here, the accounts receivable went down. If we add up all the people that owe us money, it adds up to 27,500. That then now tying out to what's on the trial balance, 27,500. We're going to scroll back over here and we're going to calculate the interest in on this number. And note that this worksheet is kind of like a subsidiary ledger over here. So once again, note that you could just have one account here called notes receivable that would then be supported by a subsidiary ledger, a worksheet similar to the accounts receivable being supported by this subsidiary ledger. Or you can break it out. Again, if there's not too many of them, I kind of like to break it out and see it on the trial balance and then group them together when creating the financial statements into one notes receivable account. Okay. So we'll do that calculation for interest. We're not going to do anything with it yet. It's not going to matter until we get the payment. And remember, that's really kind of tricky for a lot of people when we first record these because you'll see a problem and it says 30 days interest note, you know, there's a lot going on here. And it's like, well, really, all we got to do is, you know, debit accounts receivable and credit notes receivable. What do we do with the interest in the number of days? Why do we have that information? Well, we have that information for when we get the payment to know how much we're going to earn on it, but we don't do anything with it until time passes because this represents earning revenue over time. Okay. So we're going to read, we're going to calculate this. So it's going to be 3,800. And once again, it's another 7% note and the 7% is formatted for us already home tab numbers percentage is how that is formatted. I'm going to underline it going to the home tab font group underline and then we'll multiply this out. Remember this is for an entire year, 7% for a year. Because the convention equals 3,800 times that 7%, giving 2,266 for the entire year. But we don't have the entire year. We only have 30 days one month. So I'm going to break it out into interest, not per year, but per day. And then multiply it times the number of days 30. So how many days in a year, we're going to say 12 times 30, or even 360, we're going to underline that home tab font underline, divide that out equals the 2,66 per year divided by 365 days in a year, giving 0.74 cents, 74 cents about per day. So then how many days, we said 30 days, 30 days. So 30 days, going to underline that home tab font underline, multiply it out 0.74 times 30 days 0.74 per day times 30 days or equals at 0.74 in d22 times 30 days d23 and enter 2217. I'm going to round it now. This cell already being formatted just saying equals, point it to that 2217 and 22 being the answer. Let's once again just run through, we're just going to practice our interest calculations here. So we could see this a couple different ways. We got this 266 per year. We could say, well, there's 12 months in a year. So 266 divided by 12 would be 22.166 per month times 30 days is one month times one would be that same number. We can also use our ratios. We can say that if we're talking about 30 days compared to divided by over 360 days in a year would be 0.0833 which is the same as saying one month over 12 months equivalent ratios would be 0.0833 times this 266 per year 266 gives us the 22166 again. This is the most intuitive way for me typically with months if I'm allowed to do so, but days if we're getting more specific ratios are often seen by textbooks since they just want to be aware of them. Okay. We're not going to do anything with that now. We're going to do something with that when we receive the money. Next one, we're going to say that a company dishonored her note and did not pay interest is recorded on the note at this time and the bounce due is adjusted back into accounts receivable. So now we're saying that a company didn't pay us. So we're going to go back over here and we're going to say, okay, now they didn't pay us and what we try to do is give them an extension and charge the interest on it and we still didn't get paid. So now we're going to take the note has expired and we didn't get paid for it. We're going to put it back into accounts receivable so that we can still track the owe us money even though the time period has passed. So we're going to scroll back over here and we're going to say when did this happen on four, I think it was for 16 was it, let's check it. Let's check it. It's on four two. So on four two, we're going to say that we had this note receivable from a company that's not going to be paid. We're going to put it back into accounts receivable. So we might want to think about, well, what did we, we didn't get any cash. Is cash affected? No. What did we get? Well, we're really just putting it back into the receivable. So it's going to have to go back up again. So here's a, it says the debit balance, we're going to make it go up by doing the same thing to it, which is another debit. So let's start with that. I'm going to copy the accounts receivable, right click and copy, put that on top in J16, right click and paste one, two, three. Now before thinking about the amounts, let's go to the other component here and that's going to be the fact that we need the accounts receivable here to go off the book, the notes receivable, I'd rather I should say. And it's on the books for 3,800. It needs to go back down to zero because we're moving it out of there into the accounts receivable. So I'm going to right click on that, copy that, it's got to go down with a credit. So we're going to put that underneath in J17, right click and paste one, two, three. I'm going to indent that, home tab, alignment, increase the indenting. Put that in the credit column in L17 with the amount of negative 3,800. Now that's going to be not the amount that we put in the receivable because we've earned revenue here and we've earned interest revenue at this point. So we're going to record the revenue as well. It's going to be down here, interest revenue, revenue, having a credit balance that only goes up in the credit correction direction and we're going to increase it by doing the same thing to it, another credit. So we'll copy S18, right click and copy the revenue. Put that in G18, right click and paste one, two, three. Then go into the home tab, alignment and increasing the indenting. Let's see what that revenue was. If we scroll back over here, we calculated it to be about $22. So that's going to be our credit amount, $22 in revenue in L18. I'm going to put a negative 22. For the debit to accounts receivable will include the original 3,800 plus the 22 or 3,822. I'm going to do that with our sum function, our negative sum function. I call this the plug function negative SUM. Double click that sum function. You could move this out of the way if you want by grabbing it and putting it up there and then highlight those four and enter. So now, of course, if we highlight the whole thing, it adds up to zero or the debit is 3,022 and the credit is also adding up to 3,022. Okay, so let's record this out. Now here's the accounts receivable in the journal entry. We're going to record that to the accounts receivable up here in the trial balance. Something's in the center cell, so we're going to double click on it. Go to the end of it and say plus, point to that 3,822 in the receivable bringing the balance up to 35,122. Then we have the notes receivable in A, so that will be here, notes receivable. We want to be in U13, double clicking on it, going to the end of it and plus and then pointing to that 3,800 bringing the balance down to zero. Then we're going to record the interest receivable here. So the interest receivable is here on the trial balance. Double clicking on U18 and going to the end plus pointing to that 22 and enter. So that brings the balance up by the interest receivable. We are recording revenue for the receivable or the interest earned even though we haven't earned it yet. Notice this, I'm sorry, it's this interest revenue up in saying interest receivable. Not a receivable. This isn't an asset. It's interest revenue increasing the net income. Okay, so now we're going to record the same amount for the accounts receivable in the subsidiary ledger. So the subsidiary ledger in other words is out of balance. It's red, 313 not matching the 35,122. It should be matching and therefore we're going to record this amount for a company. So A is right here and put that back on the books. So in X 22, we're just basically recording the same entry over here. So in X 22 equals and we're going to point to that 3822 and enter putting us back in balance bringing the balance up here 35,122 there matching 35,122 here next to transaction 62 where we say that MI company does not pay the note to do interest is recorded on the note at the time and balance due is adjusted back into accounts receivable. So we've got the same the same type of situation for the MI company not paying us. We're going to put it back into the accounts receivable. We can see that the original amount was 6,200. We took out of accounts receivable, put it into notes receivable. They then generated revenue of 145 of interest revenue therefore the 6,200 plus the 145 what's going to have to now go back into accounts receivable. So this is going to be 6,2 and remember that first this time we're going to say over here on I 19 6,2 actually probably should be on I 26,2 and we're going to say that the accounts receivable is going to go back up. So accounts receivable is going to go up because this company is not paying us that 6,200 going to go out of the notes receivable here into accounts receivable back to accounts receivable. So accounts receivable has a debit balance we need to make it to go up by doing the same thing to it another debit. So I'm going to right click and copy scroll down we're going to put that in a J20 right click and paste 123. Now remember the amount is going to be for this 6,200 plus the 145. So let's see if we can remember that equals the 6,200 plus the 145 is 6,345. So there we have the accounts receivable of 3,000 or 6,345. We're going to take the notes receivable off the books so here it is on the books it has a debit balance we're going to take it out by doing the opposite thing to it a credit. So I'm going to put my cursor in S9 right click and copy we're going to put that right underneath in J21 right click and paste 123 the amount then it's going to be 6,200 that needs to go off the books credit 6,200 difference is going to be the interest that is earned the revenue so revenue account here is going to be the difference we can do that a couple different ways I'm going to scroll back over it's 145 calculated here or it's what we need the 6,345 minus the 6,200 I'm going to do that with the plug formula negative SUM double-click the sum function highlight those cells 3,000 or 6,345 minus the 6,200 giving that 145 that's going to go to a credit to interest revenue so S18 and a right click and copy with that in J22 right click and paste 123 going to then highlight these two and indent so highlight these home tab alignment increase the indentation then we're going to record this out so accounts receivable is here here it is on the trial balance something's in it so we're going to double-click on you six go to the end of it and plus and point to that 6,345 and enter that brings the balance up then we're going to go to the notes receivable here that's here notes receivable it's going to go down double-clicking on a U9 double-click go to the end of it and plus point into that 6,200 bringing the balance down to zero then with the interest revenue is here in U18 double-clicking U18 going to the end plus point into that 145 and enter bringing the balance up and bringing that income up note that income is going up revenue is going up although we didn't receive any money no cash received at this point we earned revenue haven't gotten it yet and it's a little little skeptical as to whether we will given the fact they haven't paid us yet but it's going back in the receivable here we also need to put that in the receivable for in my it's going to go back on the books so we're going to put it in x8 which is basically recording the same amount by the subsidiary ledger by customer so that equals this three thousand six thousand three 45 bringing the balance back up then if we look at all the receivables it sums up to 41 467 which matches the 41 467 here on the trial balance next transaction we're going to scroll back over we're going to see that what do we have next so I received payment from my company for the mature the maturity value of the dishonored note plus interest per 45 days beyond the maturity at 7% and that was 46 days so we're going to now we're going to do another calculation for MI MI now just paid us it's in the receivable for accounts receivable but because of our prior arrangement they're going to pay us both the $21 or the 145 here plus they're going to give us interest earned in the extended time period that's been back in accounts receivable will calculate that interest now so we're going to say that the debt amount at this point in time is we're going to scroll over to the subsidiary ledger to see that so it's this six thousand three forty five so scrolling back over it's six thousand three forty five seven percent interest going to underline that home tab font group underline multiply that out this equals six thousand three forty five times seven percent enter we're going to multiply that time or divide by the number of days in a year equals 12 months times 30 about 360 days underline that home tab font group underline then we're going to divide that out in F 22 by saying equals this 444 15 divided by that 360 F 20 divided by F 21 or $1 and 23 cents a day and we said that there were how many days have 46 days past due 46 days past due going to underline that home tab font underline so then we'll multiply this out this equals the 123 times the 46 days enter now I'm just going to round that to the nearest dollar by saying equals pointing to that 5675 and just that sells just taking off the pennies here and that's doing that by the rounding function so they're still there technically for Excel so I saw those there they are but we're around it to 57 okay so now we're going to record the journal entry we're going to say we got payment so what's the date on this one time we got so this is on six to receive payment the note interest received payment so 717 717 so we're gonna say is cash affected yeah we got the cash so cash has a debit balance we're gonna make it to go up by doing the same thing another debit copy and cash gonna put that on top and g24 right-clicking and pasting 1 2 3 now the amount is going to be for this 6345 plus the $57 that we got for the interest so we could do that with a formula which we may have been should have been doing before make make things more specific so this cell plus this cell and enter and actually that that'll make it around it a little bit so let's not do that so it's actually we can say this equals six three four five plus 57 the reason I don't want to use this cell is because it's actually not that number remember it's really this number so when we post it will be off by pennies and rather just use round numbers over here okay so then we're gonna say that the accounts receivable is gonna be the other side of this so if we scroll back up we see accounts receivable here it's gonna have to go down so we're gonna do the opposite thing to it as a debit balance we're gonna do the opposite which is a credit copy the accounts receivable scrolling back down we're gonna put that in g25 right-click and paste 1 2 3 now the amounts not gonna be the 64002 it's gonna be that three thousand our six thousand three forty five so the right customer yeah six thousand three forty five so this is gonna be credit six three four five difference six thousand four or two minus six down three forty five is that fifty seven dollars so I'm gonna use the negative sum function negative SUM of these cells giving credit 57 that then being interest revenue interest revenue has a credit balance we're gonna make it go up doing the same thing to it another credit right click and copy put that in g26 right click and paste 1 2 3 gonna indent these two highlighting these two home tab alignment increase indenting then post it out here's the cash on journal entry here it is on the trial balance going to you five double clicking going to the end of it plus scrolling back down just a bit picking up that 64002 and enter there's that amount the next one counts receivable credit here's the counts receivable on the trial balance we're gonna be in column you you six double-click go to the end of it plus scrolling down a bit picking up that six thousand three forty five bring in accounts receivable down then we're gonna pick up the interest revenue here putting it there in you 18 double click go to the end of it plus there's the 57 and enter that brings net income up puts us back in balance now we did something to the accounts receivable so we need to post that same thing as well to the subsidiary ledger here's MIO and his money we're gonna be here in column y9 to take this balance back down y9 that's just where it happened to land so we're gonna be here equals point to that accounts receivable one more time and that means now that M company doesn't owe us anything at this time that should put the total we add them all up for all the customers of the subsidiary ledger at 35-122 matching what's on the trial balance