Wize University Introduction to Financial Accounting Textbook > Receivables
Dishonored Notes Receivable
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Uncollected Notes Receivable
If a borrow does not meet the obligations outlined in the note receivable and no further agreement is made, the note is cancelled and an account receivable is created.
Uncollected Note
- Debit Accounts receivable for the total amount expected to be collected (principle and interest).
- Credit Interest revenue for any interest that was not previously recorded
- Credit Notes receivable for the balance remaining on the note.
- Credit Interest receivable for any interest revenue that was previously recorded but not collected.
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Example: Uncollected Notes Receivable
Prepare the journal entry to record the transaction on July 1st, the company's fiscal year ends June 30th:
April 1: Your company has just received a letter from a customer with an open account balance of $40,000. The customer is requesting a 3-month extension to the credit terms as of today.The note carries a 6% interest rate.
July 1 : You had not received a payment from the customer and the note expires.
Practice: Uncollected Notes Receivable
Prepare the journal entries to record the transactions on July 1st. The company's fiscal year ends April 30th.
Feb 1: Sold an old machine for $50,000, accepting a 7-month note for the balance. The note carries an interest rate of 8%.
Mar 1: Accepted a 4-month note from a customer whose credit terms expired on that date. The customers balance was $10,000 and the note carries an interest rate of 12%.
Jul 1: Note received from the customer on March 1st expired and no payment had been received yet.
Sep 1: Received a payment in full for the note on the sale of the old machine.
Round your answer to 2 decimal places.
.
Transactions:
| Account | Debit | Credit |
|---|---|---|