Question

Valley Spa purchased $10,200 in plumbing components from Tubman Co. Valley Spa signed a 60-day, 14% promissory note for $10,200. If the note is dishonored, but Tubman intends to continue collection efforts, what is the journal entry to record the dishonored note? (Use 360 days a year.)

Answer 1

Answer:

Debit Accounts Receivable—Valley Spa $10,438 Credit Interest Revenue $238

Credit Notes Receivable $10,200.

Explanation:

Preparation of the the journal entry to record the dishonored note

Debit Accounts Receivable—Valley Spa $10,438

($10,200+$238)

credit Interest Revenue $238

($10,200 x 14% x 60/ 360)

Credit Notes Receivable $10,200

(To record the dishonored note)