Question

Valley Spa purchased $10,200 in plumbing components from Tubman Co. Valley Spa signed a 60-day, 14% promissory note for $10,200. If the note is dishonored, but Tubman intends to continue collection efforts, what is the journal entry to record the dishonored note

Answer 1

Answer: Debit Accounts Receivable -Valley Spa of $10,438 Credit interest revenue $238, Credit Notes receivable $10,200

Step-by-step explanation:

Interest Revenue = Principal x Rate X time

$10,200 x 14% x 60/ 360 ( Using 360 days in a year)

$238

Journal to record dishonored note for Tubman

Accounts titles and explanation Debit Credit

Accounts receivable $10, 438

Interest revenue $238

Notes receivable $10,200