On November 1, 2010, Salem Corporation sold land priced at $900,000 in exchange for a 6%, six-month note receivable.

-Refer to the above data. Assuming the maker of the note defaults on May 1, 2011, Salem will record on this date:

Question

On November 1, 2010, Salem Corporation sold land priced at $900,000 in exchange for a 6%, six-month note receivable.

-Refer to the above data. Assuming the maker of the note defaults on May 1, 2011, Salem will record on this date:

Quizplus · Accepted Answer

Upon default, Salem will record the face amount of the note and any accrued interest as Accounts Receivable. Therefore, Salem will record an accounts receivable of $927,000 ($900,000 + $27,000) and interest revenue of $18,000 (($900,000 x 6%)/12 x 12 months).

On November 1, 2010, Salem Corporation Sold Land Priced at $900,000