Manx Company's bank statement shows that a note receivable of $15,000 and interest of $1,050 were collected by the bank on behalf of the depositor. The entry required on the company's books is

Question

Quizplus · Accepted Answer

The company received cash from the bank, so Cash should be debited. The Note Receivable and interest collected were liabilities for the company, and they are no longer owed, so they should be credited. The interest collected is considered interest income for the company, so Interest Income should be credited as well. Therefore, the correct entry is debit Cash; credit Notes Receivable; credit Interest Income (D).

Manx Company's Bank Statement Shows That a Note Receivable of $15,000