Question

Journalize the following transactions of Trapper Jon’s Productions. Assume 360 days in a year. If an amount box does not require an entry, leave it blank.
June 23 Received a $48,000, 90-day, 8% note dated June 23 from Radon Express Co. on account.
Sept. 21 The note is dishonored by Radon Express Co.
Oct. 21 Received the amount due on the dishonored note plus interest for 30 days at 10% on the total amount charged to Radon Express Co. on September 21.

June 23
Notes Receivable __________
Accounts Receivable-Radon Express Co. _______

Sept. 21
Accounts Receivable-Radon Express Co. _________
Notes Receivable ________
Interest Revenue _________

Oct. 21
Cash ________
Accounts Recelvable-Radon Express Co. _____
Interest Revenue ________

Answer 1

Answer:

June 23 Received a $48,000, 90-day, 8% note dated June 23 from Radon Express Co. on account.

• Dr Notes receivable 48,000
•     Cr Accounts receivable 48,000

Sept. 21 The note is dishonored by Radon Express Co.

• Dr Accounts receivable 48,960
•     Cr Notes receivable 48,000
•     Cr Interest revenue 960

When a customer defaults on a note, the company is allowed to convert the note back to accounts receivable and charge any accrued interests. Depending on the client, the company can give them more time (by switching back the note into accounts receivable) or the company can write off the note and try to sell it to a collection company.

Oct. 21 Received the amount due on the dishonored note plus interest for 30 days at 10% on the total amount charged to Radon Express Co. on September 21.

• Dr Cash 49,368
•     Cr Accounts receivable 48,960
•     Cr Interest revenue 408