Question

On November 1, 2019, Mandrake Corp. and Olivier Ltd. reached an agreement to convert Olivier’s outstanding account receivable of $27,000 into a 3-month, 8% note receivable. On February 1, 2020, Olivier dishonoured the note receivable. Prepare all required journal entries for Mandrake for the above transactions, assuming a December 31 year end and assuming adjusting journal entries are recorded at the end of its fiscal year.

On November 1, 2019, Mandrake Corp. and Olivier Ltd. reached an agreement to convert Olivier’s outstanding account receivable of $27,000 into a 3-month, 8% note receivable. On February 1, 2020, Olivier dishonoured the note receivable. Prepare all required journal entries for Mandrake for the above transactions, assuming a December 31 year end and assuming adjusting journal entries are recorded at the end of its fiscal year.

Answer 1

Date	Accounts and Explanations	Debit	Credit
Nov 1, 2019	Notes Receivable	$           27,000
	Accounts Receivable		$           27,000
	(Acouns receivable converted in to 3 month notes receivable with 8%)
Dec 31, 2019	Accrued Interest	$                 360
	Interest revenue		$                 360
	(Interest on notes receivable recorded)
Feb 1, 2020	Accounts receivable	$           27,540
	Notes receivable		$           27,000
	Interest revenue		$                 180
	Accrued Interest		$                 360
	(notes receivable dishonoured)

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