A $6,000, 60-day, 12% note recorded on November 21 is not paid by the maker at maturity. The journal entry to recognize this event is
A) debit Cash, $6,120; credit Notes Receivable, $6,120
B) debit Accounts Receivable, $6,120; credit Notes Receivable, $6,000; credit Interest Receivable, $120
C) debit Notes Receivable, $6,060; credit Accounts Receivable, $6,060
D) debit Accounts Receivable, $6,120; credit Notes Receivable, $6,000; credit Interest Revenue, $120

Question

Quizplus · Accepted Answer

The note receivable is not paid and has matured, so it needs to be written off. The accounts receivable is debited to recognize that the payment is now overdue, and the notes receivable is credited to write off the amount. Since interest was accrued on the note, interest revenue should also be recognized, so it is credited in the amount of $120. Therefore, the correct journal entry option is D.

A $6,000, 60-Day, 12% Note Recorded on November 21 Is