A $6,000, 60-day, 12% note recorded on November 21 is not paid by the maker at maturity. The journal entry to recognize this event is

Question

Quizplus · Accepted Answer

When a note is not paid at maturity, it is considered a default and the holder of the note (in this case, the company) can record it as a loss. The entry should include debiting the Accounts Receivable account for the full amount due ($6,120), crediting the Notes Receivable account for the principal amount of the note ($6,000), and crediting the Interest Revenue account for the amount of interest the company was expecting to earn ($120). Therefore, option D is the correct choice.

A $6,000, 60-Day, 12% Note Recorded on November 21 Is