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Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094

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BuyFindarrow_forward

Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094
Textbook Problem

The note receivable dishonored in Discussion Question 9 is paid on December 30 by the maker, plus interest for 30 days at 9%. What entry should be made to record the receipt of the payment?

To determine

Accounts receivable:

Accounts receivable refers to the amounts to be received within a short period from customers upon the sale of goods and services on account. In other words, accounts receivable are amounts customers owe to the business. Accounts receivable is an asset of a business.

Dishonored note:

Note receivable refers to a written promise by the debtor for the amounts to be received within a stipulated period of time. Note is otherwise known as promissory note. If this promissory note is not settled by the debtor at its maturity date, then it became is known as dishonored note.

To show: The entries that would be made to record the receipt of payment.

Explanation

Journalize the entries to record the receipt of payment.

Date Account Title and Explanation Debit ($) Credit ($)
December 30 Cash 245,427  
      Accounts receivable   243,600
      Interest revenue   1,827
  (To record the collection of cash on account along with 9% interest)    

Table (1)

Working note:

Calculate the amount of interest revenue earned on account for the period of 30 days.

Interest revenue earnedfor the period 30 days} = [Accounts Receivable×Interest rate×Time in terms of one year]= $243,600×9%×30 days360 days=$1,827

On November, the note receivable has been dishonored; to record this dishonor on note, the following entry would have been made on November

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