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A customer was unable to pay the accounts receivable on time in the amount of $34,000. The customer was able to negotiate with the company and transferred the accounts receivable into a note that includes interest, along with an up-front cash payment of $6,000. The note maturity date is 24 months with a 15% annual interest rate. What is the entry to recognize this transfer?

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Principles of Accounting Volume 1

19th Edition
OpenStax
Publisher: OpenStax College
ISBN: 9781947172685

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Section
FindFindarrow_forward

Principles of Accounting Volume 1

19th Edition
OpenStax
Publisher: OpenStax College
ISBN: 9781947172685
Chapter 9, Problem 26Q
Textbook Problem
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A customer was unable to pay the accounts receivable on time in the amount of $34,000. The customer was able to negotiate with the company and transferred the accounts receivable into a note that includes interest, along with an up-front cash payment of $6,000. The note maturity date is 24 months with a 15% annual interest rate. What is the entry to recognize this transfer?

To determine

Concept introduction:

Note receivable is the instrument that represents the amountof money borrowed or receivables converted into note receivable. The note receivable is issued for a specified period and a specified rate of interest is receivable on the principal amount of the note.

To indicate:

The journal entry to recognize the transfer of receivable into note receivable.

Explanation of Solution

The Journal entry to record the transfer of receivable into note receivable is explained as follows:

Journal Entries
Date Account titles Debit Credit
Cash $ 6,000

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Chapter 9 Solutions

Principles of Accounting Volume 1
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