Question

Prepare journal entries for each of the following transactions:
	On December 1, 2018, VanTrade received a 6%, 1-year, note receivable from a customer, GastownPrinting. This note was issued in payment for a $20,000 outstanding account receivable.
	On December 31, 2018, VanTrade recorded an end-of-year adjusting entry to record accrued interest on the note receivable.
	On November 30, 2019, GastownPrinting paid Vantrade the full amount due on the note receivable.
How would the November 30 entry differ if GastownPrinting defaulted on the payment?

Answer 1

Date	General Journal	Debit	Credit
December 1, 2018	Note receivable	$20,000
	Accounts receivable - Gastown Printing		$20,000
	( To record issuance of note)
December 31, 2018	Interest receivable	$100
	Interest revenue		$100
	( To record interest receivable)
November 30, 2019	Cash	$21,200
	Interest receivable		$100
	Interest revenue		$1,100
	Note receivable		$20,000
	( To record note at maturity)

Interest receivable on December 31, 2018 = Note receivable x Interest rate x 1/12

= 20,000 x 6% x 1/12

= $100

Interest receivable on November 30, 2019 = Note receivable x Interest rate x 11/12

= 20,000 x 6% x 1/12

= $1,100

If Gastown Printing defaulted on the payment on November 30, 2019 , the following journal entry will be made:

Date	General Journal	Debit	Credit
November 30 ,2019	Accounts receivable - Gastown Printing	$21,200
	Interest receivable		$100
	Interest revenue		$100
	Note receivable		$20,000
	( To record GastownPrinting defaulted on the payment )