Question

Young Company lends Dobson industries $40,000 on January 1, 2017, accepting a 9-month, 9% interest note. If Dobson dishonors the note and does not pay it in full at maturity but Young expects that it will eventually be able to collect the debt, which of the following entries should most likely be made by Young Company?

Answer 1

Entries that should most likely be made by Young Company is DR Accounts Receivable 42,700;CR Notes Receivable 40,000;CR Interest Revenue 2,700

Explanation:

Interest = 40,000 x 0.09 x 9/12 = 2,700

entry :

Debit Credit

Accounts receivable $42,700

Interest revenue $2700

Note receivable $40,000