Question

Assume that Pope Enterprises held a $10,000, 10 percent, six-month note signed by Mary Drew. On December, 1, 2015, the maturity date, Drew dishonored the note. At this point, Drew owes a total of $10,500, which is comprised of the principal of $10,000 plus interest in the amount of $500 (or $10,000 x 10% x 6/12). Prepare the December 1 entry for Pope by selecting the account names and dollar amounts from the drop-down menus.

Answer 1

See explanation section.

Step-by-step explanation:

The journal entry to record the failure of paying note receivable which is dishonored by pope, is as follows:

December 1, Accounts receivable Debit $10,500

Notes receivable Credit $10,000

Interest receivable Credit $500

Calculation: Interest receivable = $10,000 × 10% = 1,000 × 6 ÷ 12 = $500

If a customer pays the bill later, a new interest will have to pay to the seller.