Question

Valley Spa purchased $7,800 in plumbing components from Tubman Co. Valley Spa signed a 60-day, 10% promissory note for $7,800. If the note is dishonored, but Tubman intends to continue collection efforts, what is the journal entry to record the dishonored note

Answer 1

Journal entries are as below

Step-by-step explanation:

1. Debit Accounts Receivable - Valley Spa $7,930, Credit Notes Receivable $7,800 + Credit Notes Interest Revenue $130.

2. Debit Bad Debt Expense $7,930; Credit Accounts Receivable $7,930.

3. Debit Bad Debt Expense $7,800; Credit Notes Receivable $7,800.

4. Debit Accounts Receivable $7,930, Credit Notes Receivable $8,060; Debit Bad Debt Expense $130.

5. Debit Accounts Receivable - Valley Spa $7,800; Credit Notes Receivable $7,800.