Question

Andrews Company accepted a note receivable from a credit customer who failed to pay their $2,000 Accounts Receivable balance. The customer signed a promissory note which was accepted for 9 months at 5% interest. At the end of the 9 months, the customer does not pay, so it becomes a dishonored note receivable.

Answer 1

First.At the time of delivery of the document, the company must cancel the customer's debt and register the document to charge more interest.( 2.000 x 0.05 = 100)

Notes receivable 2.100

interest to accrue 100

accounts receivable 2.000

Second. Then at the time of payment the client does not pay. The company must cancel the document and interests and according to its criteria, it can register an asset (1), a doubtful credit provision (2) or a loss (3) for this credit.

Notes receivable 2.100

interest to accrue 100

(1)accounts receivable 2.000

(2)provisions on doubtful debts

(3)bad debts