Final answer:
The correct journal entry to record the non-payment of a $9,600, 60-day, 12% note at maturity includes debiting Notes Receivable for the note amount plus interest ($9,792) and crediting Accounts Receivable for the principal ($9,600) and Interest Receivable for the interest ($192). .
Step-by-step explanation:
The question provided is related to recording the non-payment of a promissory note at maturity in accounting. Specifically, it asks for the correct journal entry when a $9,600, 60-day, 12% note is not paid by its due date. To determine the journal entry, we first need to calculate the interest that has accrued on the note over its 60-day period.
To calculate the interest on the note: Interest = Principal x Rate x Time. For a $9,600 note at 12% annual interest over 60 days, the interest would be $9,600 x 12% x (60/365) = $192. Since the note has not been paid at maturity, the accrued interest is now due as well.
Therefore, the correct journal entry would be:
- Debit Notes Receivable: $9,792 (which includes the principal and the accrued interest)
- Credit Accounts Receivable: $9,600 (for the principal amount due from the maker)
- Credit Interest Receivable: $192 (for the accrued interest income)
This entry removes the note from Notes Receivable, reflecting that it is no longer expected to be paid in its original form, and recognizes that the amount due (principal plus interest) is now part of Accounts Receivable.
Thus, the correct answer to the student's question is option D: Debit Notes Receivable, $9,792; Credit Accounts Receivable, $9,600; Credit Interest Receivable, $192.