Question

On March 15, Viking Office Supply agrees to accept $1,200 in cash along with a $2,800, 60-day, 15 percent note from one of its customers to settle his $4,000 past-due account. Prepare the March 15 entry for Viking Office Supply .

Answer 1

Viking Office Supply's journal entry for receiving $1,200 in cash and a $2,800, 60-day, 15% note on March 15 involves debiting Cash and Notes Receivable, and crediting Accounts Receivable to settle the past-due account.

Step-by-step explanation:

On March 15, when Viking Office Supply agrees to accept $1,200 in cash and a $2,800, 60-day, 15 percent note to settle a $4,000 past-due account, the journal entry on that date would include a debit to Cash for $1,200 as money is being received.

Additionally, a debit to Notes Receivable for $2,800 is recorded because the company is receiving a promissory note that promises future payment within 60 days at an interest rate of 15%. Finally, since the customer's past-due account (Accounts Receivable) of $4,000 is being settled, a credit to Accounts Receivable for $4,000 is recorded to reflect the reduction in the amount owed by the customer.

The journal entry would look like this:

• 
  
• Cash $1,200
• 
  
• Notes Receivable $2,800
• 
  
• Accounts Receivable ($4,000)

This entry recognizes the receipt of cash, the promise to pay in the future (along with interest), and the settling of an outstanding account balance.