On November 1, 2018, Rainey accepted a $10,000, three-month note receivable from a major customer. Interest on the note, computed at a 12% annual rate, will be collected with the principal.
On December 1, 2018, Rainey borrowed $12,000 from its bank. The principal, plus interest computed at a 10% annual rate, is due on June 1, 2019.
Rainey uses the straight-line method to record depreciation on its equipment. The equipment, which cost $12,000, has an estimated life of 10 years and no expected residual value.
$3.725 of salaries had accrued as of December 31, 2018
Required:
b.
Assuming that Rainey does use reversing entries, prepare December 31. 2018 adjusting entries and 2019 reversing entries.
Assuming that Rainey does not use reversing entries, prepare journal entries to record the collection of the note receivable and the payment of the note payable in 2019.
