Question

Suppose a customer is unable to pay its account on time, so the company accepts a six-month interest-bearing note receivable to replace the customer's account receivable. What effect will accepting the note receivable have on the company's financial statements at the time of acceptance?

Answer 1

Answer: The acceptance of the note receivable will have no effect on the company's financial statements at the time of acceptance because we are replacing "accounts receivable" with "notes receivable", in other words we are replacing one asset with another asset , so there will be no equity variation.