The journal entry for a note collected by the bank with interest requires a debit to Cash and a credit to both Note Receivable and Interest Revenue.

Question

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When a bank collects a note with interest, it increases the amount of cash it holds, decreases the amount of the note receivable on its balance sheet, and recognizes interest revenue earned on the note. Therefore, the journal entry for such a transaction requires a debit to Cash and a credit to both Note Receivable and Interest Revenue.

The Journal Entry for a Note Collected by the Bank