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On June 1, 2020, BlueSky Company provided services to GreenGrass Company and received a 1-year,...

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Accounting

On June 1, 2020, BlueSky Company provided services to GreenGrass Company and received a 1-year, 8%, $150,000 note, due May 31, 2021. Interest is payable at maturity. BlueSky records adjusting entries annually at December 31.

a. Compute the total interest on the note. How much interest revenue will be recognized in 2020? In 2021?

b. Record the June 1, 2020, journal entry for BlueSky.

c. Record the December 31, 2020, adjusting journal entry for BlueSky.

d. BlueSkys 2020 preliminary net income of $100,000 was computed without including any amounts related to the receipt of the note or the 12-31-20 adjusting entry. Determine the correct amount of 2020 net income. Ignore taxes.

e. On BlueSkys December 31, 2019, balance sheet, retained earnings was reported at $300,000. In 2020, the company paid $40,000 in dividends. What is the December 31, 2020, retained earnings balance?

f. What amount(s) will BlueSky report on the December 31, 2020, balance sheet related to the note? How will these amounts be classified?

e. Record the May 31, 2021, journal entry for BlueSky for the receipt of principal and interest.

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