Fill This Form To Receive Instant Help
Fill This Form To Receive Instant Help
Homework answers / question archive / Question 24 A $6,000, 60-day, 12% note recorded on November 21 is not paid by the maker at maturity
Question 24 A $6,000, 60-day, 12% note recorded on November 21 is not paid by the maker at maturity. The journal entry to recognize this event is O debit Notes Receivable, 56,060, credit Accounts Receivable, 56,060 O debat Cash, 56,120, credit Notes Receivable, $6,120 debit Accounts Receivable, 56,120 credit Notes Receivable, $6.000 credit Interest Revenue, $120 debit Notes Receivable, 56,120, credit Accounts Receivable, 56,000, credit Interest Receivable, $120
ANSWER: C
When the Note is issued following journal Entry has to passed
| Particulars | Amount (Debit) | Amount(Credit) |
| Note Receivables A/c | $6,000 | |
| Account Receivables A/c | $6,000 | |
| (Note issued against Account receivable) |
Note :
Interest revenue has to be recognised as and when it is earned.
On the date of maturity, Note has been dishonoured. Thereby the journal entry passed earlier has to be reversed and revenue with respect to interest has to be recognised.
| Interest Revenue to be Recognised | Note Receivable × Interest rate × No. Of days |
Interest Revenue to be Recognised = ((($6,000×12%)/360)× 60)
interest Revenue to be Recognised = $120
Accounts Receivables(maturity) = Accounts Receivables + interest Revenue
Account Receivable(maturity) = $6,000+ $120 = $6,120
JOURNAL ENTRY ON THE DATE OF MATURITY
| Particulars | Amount(Debit) | Amount (Credit) |
| Account Receivables A/c | $6,120 | |
| Note Receivables A/c | $6,000 | |
| Interest Revenue | $120 | |
| (Being Note Payable dishonoured and internet revenue recognised) |
In case of any further queries regarding answer please drop a comment. I will surely resolve it at the earliest possible.
