Question

On July 9, Mifflin Company receives a $10,200, 90-day, 6% note from customer Payton Summers as payment on account. What entry should be made on July 9 to record receipt of the note?

Answer 1

Since on July 9, Mifflin Company receives a $ 10,200, 90-day, 6% note from customer Payton Summers as payment on account, to determine what entry should be made on July 9 to record receipt of the note the following calculation must be performed :

90 days = 3 months

6/12 x 3 = 1.5%

10,200 x 1,015 = 10,353

Therefore, a debt cancellation for $ 10,200 must be made in the company's accounting records, plus an interest generation for $ 153, which will be justified by the cash income of $ 10,353.