Uniform Supply accepted a $4,800,90-day,10% note from Tracy Janitorial on October 17.If the note is dishonored,but Uniform Supply intends to continue collection efforts,what entry should Uniform Supply make on January 15 of the next year? (Assume no reversing entries are made.)(Use 360 days a 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

When a note is dishonored and the company intends to continue collection efforts, the amount due (principal plus interest) is transferred from Notes Receivable to Accounts Receivable. The interest for 90 days on a $4,800 note at 10% annual interest is $120 ([$4,800 x 10%] x [90/360]), making the total $4,920. The entry reflects moving the balance to Accounts Receivable and recognizing the interest that has accrued.

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