Question

On May 2, Cartwright Company receives a $5,000, 6-month, 10% note from Sheldon Company as a settlement of its accounts receivable. What journal entry will Cartwright Company record on May 2?

Answer 1

On May 2, Cartwright Company would record the journal entry: Debit Notes Receivable $5,000, and Credit Accounts Receivable $5,000.

Step-by-step explanation:

On May 2, Cartwright Company would record the following journal entry:

1. 
   
3. Debit Notes Receivable $5,000
4. 
   
6. Credit Accounts Receivable $5,000

This entry reflects the settlement of accounts receivable with Sheldon Company by receiving a $5,000, 6-month, 10% note. The Notes Receivable account is debited to record the increase in the value of the note, and the Accounts Receivable account is credited to remove the outstanding receivable from the books.