Question

ILLUSTRATION 6
Mr. David draws two bills of exchange on 1.1.2016 for R6,000 and 310,000. The bills of exchange for 25.000 is for
two months while the bill of exchange for 10,000 is for three months. These bills are accepted by Me Thomas
On 4.3.2016, Mr. Thomas requests Mr. David to renew the first bill with interest at 18% p.a. for a period of two
months. Mr. David agrees to this proposal On 20.3.2016, Mr. Thomas retires the acceptance for 10000 the
interest rebate i.e. discount being 7100. Before the due date of the renewed bill, Mr. Thomas becomes insolvent
and only 50 paise in a rupee could be recovered from his estate.
You are to give the journal entries in the books of Mr. David.​

Answer 1

Working Note:

Interest = 6,000 x  18% x   2     = 180

                                            12

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Answer 2

Explanation:

Interest=6000×18/100×2/12=180

compound entries are passed for receiving two bills and for new acceptance and it's interest