Uniform Supply accepted a $4,800,90-day,10% note from Tracy Janitorial on October 17.If the note is dishonored,what entry should Uniform Supply make on January 15 of the next year?
A)Debit Notes Receivable $4,800;debit Interest Receivable $120;credit Sales $4,920.
B)Debit Cash $4,920;credit Notes Receivable $4,920.
C)Debit Cash $4,920;credit Interest Revenue $100;credit Interest Receivable $20,credit Notes Receivable $4,800.
D)Debit Cash $4,920;credit Interest Revenue $20;credit Interest Receivable $100,credit Notes Receivable $4,800.
E)Debit Accounts Receivable $4,920;credit Interest Revenue $20;credit Interest Receivable $100,credit Notes Receivable $4,800.

Question

Quizplus · Accepted Answer

The note is dishonored, so Uniform Supply should debit Accounts Receivable for the total amount due, which includes the principal and interest. The interest is calculated as $4,800 * 10% * (90/360) = $120. Since the note is not paid, the entry should reflect the transfer of the note and interest to Accounts Receivable.

Uniform Supply Accepted a $4,800,90-Day,10% Note from Tracy Janitorial on October