Valley Spa purchased $11,700 in plumbing components from Tubman Co. Valley Spa signed a 60-day, 14% promissory note for $11,700. If the note is dishonored, but Tubman intends to continue collection efforts, what is the journal entry to record the dishonored note? (Use 360 days a year.)

Question

Business

Peyton Lutz

4 November, 06:58

Valley Spa purchased $11,700 in plumbing components from Tubman Co. Valley Spa signed a 60-day, 14% promissory note for $11,700. If the note is dishonored, but Tubman intends to continue collection efforts, what is the journal entry to record the dishonored note? (Use 360 days a year.)

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Answers (1)

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Lawrence David · Answer 1

Given that,

Value of promissory note = $11,700

Time period = 60 days

Interest rate = 14%

Interest revenue:

= Note value * Interest rate * Time period

= $11,700 * 0.14 * (60/360)

= $273

Therefore, the journal entry is as follows:

Accounts receivable A/c Dr. $11,973

To Interest revenue $273

To Notes receivable $11,700

(To record the dishonored note)