Question

On March 9, Phillips gave Jackson Company a 60-day, 12% promissory note for $5,200. Phillips dishonors the note on May 8. Record the entry that Jackson would make when the note is dishonored, assuming that no interest has been accrued. Assume Jackson expects collection will occur. (Use 360 days for calculation. Credit account titles are automatically indented when the amount is entered. Do not indent manually. Round intermediate calculations to 2 decimal places, e.g. 52.75 and final answers to 0 decimal places, e.g. 1,525.)

Answer 1

Answer:

Jackson Company

Journal Entries:

Debit Accounts Receivable (Phillips) $6,0687

Credit Notes Receivable $5,200

Credit Interest on Notes Receivable $867

To record the reversal of the dishonored promissory note and the accruing interest for 60 days.

Explanation:

a) Data and Calculations:

March 9, 12% Promissory Note Receivable = $5,200

May 8, Note dishonored

Interest on note = 12% of $5,200 * 60/360 = $867

b) The above entries are made with the hope that collection will be made from Phillips eventually.