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 Cash $4,920; credit Interest Revenue $100; credit Interest Receivable $20, credit Notes Receivable $4,800.
B) Debit Notes Receivable $4,800; debit Interest Receivable $120; credit Sales $4,920.
C) Debit Accounts Receivable $4,920; credit Interest Revenue $20; credit Interest Receivable $100, credit Notes Receivable $4,800.
D) Debit Cash $4,920; credit Notes Receivable $4,920.
E) Debit Cash $4,920; credit Interest Revenue $20; credit Interest Receivable $100, credit Notes Receivable $4,800.

Question

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 Cash $4,920; credit Interest Revenue $100; credit Interest Receivable $20, credit Notes Receivable $4,800.
B) Debit Notes Receivable $4,800; debit Interest Receivable $120; credit Sales $4,920.
C) Debit Accounts Receivable $4,920; credit Interest Revenue $20; credit Interest Receivable $100, credit Notes Receivable $4,800.
D) Debit Cash $4,920; credit Notes Receivable $4,920.
E) Debit Cash $4,920; credit Interest Revenue $20; credit Interest Receivable $100, credit Notes Receivable $4,800.

Quizplus · Accepted Answer

The note is dishonored, so the amount due is transferred to Accounts Receivable. Interest for 90 days is calculated as $4,800 * 10% * (90/360) = $120. The entry records the total amount due ($4,920) as Accounts Receivable, credits the original note amount, and separates the interest into Interest Revenue and Interest Receivable.

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