Question

Sheridan Company receives a $27000, 3-month, 8% promissory note from Pharoah Company in settlement of an open accounts receivable. What entry will Sheridan Company make upon receiving the note?

Answer 1

Note Receivable debit 27,000

Account receivable credit 27,000

Step-by-step explanation:

It will write-off the account and transfer the balance of Pharoah Company account to the notes receivable to represent the change in the conditions.

The interest will be accrued once times past. They are not relevant at the moment of recording the note in the accounting.

The interest entries will be done at end of the month, end of the accounting cycle or at the moment of honor the note.