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College Accounting (Book Only): A ...

13th Edition
Scott + 1 other
ISBN: 9781337280570

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BuyFindarrow_forward

College Accounting (Book Only): A ...

13th Edition
Scott + 1 other
ISBN: 9781337280570
Textbook Problem

Prepare entries in general journal form to record the following:

Aug. 6    Woodard Company failed to pay its 30-day, 10 percent note for $600, dated July 9. The note is thus dishonored at maturity.

To determine

Journalize the given transaction for dishonored note receivable.

Explanation

Dishonored note receivable: When the payer fails to pay the amount due on maturity, the note is referred to as dishonored note receivable. But the payer is still obligated to pay the debt, hence, the note is dishonored and accounts receivable is increased to reinstate.

Journal entry: Journal entry is a set of economic events which can be measured in monetary terms. These are recorded chronologically and systematically.

Debit and credit rules:

  • Debit an increase in asset account, increase in expense account, decrease in liability account, and decrease in stockholders’ equity accounts.
  • Credit decrease in asset account, increase in revenue account, increase in liability account, and increase in stockholders’ equity accounts.

Journalize the given transaction for dishonored note receivable.

Date Accounts and Explanation Post Ref. Debit ($) Credit ($)
August 6 Accounts Receivable, Company W   605  
                Notes Receivable     600
      Interest Income     5
    (Record note receivable being dishonored at maturity)      

Table (1)

Description:

  • Accounts Receivable, Company W is an asset account...

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