Question

Paper Company receives a $4,945, 3-month, 11% promissory note from Dame Company in settlement of an open accounts receivable. What entry will Paper Company make upon receiving the note

Answer 1

Answer and Explanation:

The journal entry is shown below:

Notes Receivable, Dame Company $4,945

To Accounts Receivable, Dame Company $4,945

(Being the note receivable is recorded in settlement of the account receivable)

Here the note receivable is debited as it increased the assets and at the same time the account receivable is credited as it decreased the assets. Also the assets contains normal debit balance