When an interest-bearing note comes due and is uncollectible,the journal entry includes:
A)debiting Notes Receivable; crediting Accounts Receivable.
B)debiting Notes Receivable; crediting Accounts Receivable and Interest Revenue.
C)debiting Accounts Receivable and crediting Interest Revenue.
D)debiting Accounts Receivable and crediting Notes Receivable and Interest Revenue.

Question

Quizplus · Accepted Answer

When an interest-bearing note is deemed uncollectible at its due date, the correct accounting treatment is to remove the note from the books and recognize any accrued interest as uncollectible as well. This is done by debiting Accounts Receivable for the total amount due (including interest) and crediting Notes Receivable for the principal amount of the note and Interest Revenue for the accrued interest. This entry reflects the expectation of eventually collecting the amount through the accounts receivable process, while removing the specific note receivable from the books.

When an Interest-Bearing Note Comes Due and Is Uncollectible,the Journal