{"id":219149,"date":"2025-05-25T17:45:13","date_gmt":"2025-05-25T17:45:13","guid":{"rendered":"https:\/\/learnexams.com\/blog\/?p=219149"},"modified":"2025-05-25T17:45:15","modified_gmt":"2025-05-25T17:45:15","slug":"accounting-for-notes-receivable-dishonored-notes-and-accrued-interest-revenue-learning-objective-4-consider-the-following-transactions-for-cc-publishing","status":"publish","type":"post","link":"https:\/\/www.learnexams.com\/blog\/2025\/05\/25\/accounting-for-notes-receivable-dishonored-notes-and-accrued-interest-revenue-learning-objective-4-consider-the-following-transactions-for-cc-publishing\/","title":{"rendered":"Accounting for notes receivable, dishonored notes, and accrued interest revenue (Learning Objective 4) Consider the following transactions for CC Publishing"},"content":{"rendered":"\n

P-F:8-34A Accounting for notes receivable, dishonored notes, and accrued interest revenue (Learning Objective 4) Consider the following transactions for CC Publishing. 2024 Dec. 6 Received a $18,000, 90-day, 6% note in settlement of an overdue accounts receivable from Go Go Publishing. Made an adjusting entry to accrue interest on the Go Go Publishing note. Made a closing entry for interest revenue. 31 31 2025 Mar. 6 Jun. 30 Oct. 2 Dec. 1 1 Collected the maturity value of the Go Go Publishing note. Loaned $11,000 cash to Lincoln Music, receiving a six-month, 20% note. Received a $2,400, 60-day, 20% note for a sale to Tusk Music. Ignore Cost of Goods Sold. Tusk Music dishonored its note at maturity. Wrote off the receivable associated with Tusk Music. (Use the allowance method.) Collected the maturity value of the Lincoln Music note. 30 Journalize all transactions for CC Publishing. Round all amounts to the nearest dollar. Dec. 31, 2024 Income Summary CR $74<\/p>\n\n\n\n

The Correct Answer and Explanation is:<\/mark><\/strong><\/p>\n\n\n\n

Here’s the journal entries<\/strong> for CC Publishing<\/strong> related to the transactions from the prompt:<\/p>\n\n\n\n

\n\n\n\n

\ud83d\udcd8 Journal Entries for CC Publishing<\/h3>\n\n\n\n

2024<\/strong><\/p>\n\n\n\n

Dec. 6<\/strong><\/p>\n\n\n\n

Notes Receivable \u2013 Go Go Publishing   18,000  \n   Accounts Receivable \u2013 Go Go Publishing       18,000  \n(To record receipt of a 90-day, 6% note)\n<\/code><\/pre>\n\n\n\n
Dec. 31<\/strong><\/p>\n\n\n\n
Interest Receivable                      90  \n   Interest Revenue                               90  \n(To accrue interest: $18,000 \u00d7 6% \u00d7 25\/360)\n<\/code><\/pre>\n\n\n\n
Dec. 31<\/strong><\/p>\n\n\n\n
Interest Revenue                        90  \n   Income Summary                                90  \n(To close interest revenue to income summary)\n<\/code><\/pre>\n\n\n\n
\n\n\n\n
2025<\/strong><\/p>\n\n\n\n
Mar. 6<\/strong><\/p>\n\n\n\n
Cash                                       18,270  \n   Notes Receivable \u2013 Go Go Publishing      18,000  \n   Interest Receivable                          90  \n   Interest Revenue                             180  \n(To collect note: $18,000 + full interest: 90 already accrued + $18,000 \u00d7 6% \u00d7 65\/360 = 180)\n<\/code><\/pre>\n\n\n\n
Jun. 30<\/strong><\/p>\n\n\n\n
Notes Receivable \u2013 Lincoln Music     11,000  \n   Cash                                               11,000  \n(To record loan to Lincoln Music, 6-month, 20% note)\n<\/code><\/pre>\n\n\n\n
Oct. 2<\/strong><\/p>\n\n\n\n
Notes Receivable \u2013 Tusk Music        2,400  \n   Sales Revenue                                    2,400  \n(To record sale on a 60-day, 20% note)\n<\/code><\/pre>\n\n\n\n
Dec. 1<\/strong><\/p>\n\n\n\n
Accounts Receivable \u2013 Tusk Music   2,464  \n   Notes Receivable \u2013 Tusk Music        2,400  \n   Interest Revenue                                 64  \n(To dishonor note: $2,400 + $2,400 \u00d7 20% \u00d7 60\/360)\n<\/code><\/pre>\n\n\n\n
Dec. 1<\/strong><\/p>\n\n\n\n
Allowance for Doubtful Accounts    2,464  \n   Accounts Receivable \u2013 Tusk Music     2,464  \n(To write off Tusk Music's dishonored note)\n<\/code><\/pre>\n\n\n\n
Dec. 30<\/strong><\/p>\n\n\n\n
Cash                                           13,100  \n   Notes Receivable \u2013 Lincoln Music   11,000  \n   Interest Revenue                                 2,100  \n(To collect note: $11,000 + $11,000 \u00d7 20% \u00d7 6\/12 = 2,100)\n<\/code><\/pre>\n\n\n\n
\n\n\n\n
\ud83d\udcac Explanation<\/h3>\n\n\n\n
This exercise demonstrates accounting for notes receivable<\/strong>, including accrual of interest, dishonored notes, and recognition of interest revenue. A note receivable<\/strong> is a formal promise that a customer will pay a specific amount of money on a specified future date, often with interest.<\/p>\n\n\n\n
On Dec. 6<\/strong>, CC Publishing exchanged an overdue account for a 90-day, 6% note from Go Go Publishing. This shifted the balance from Accounts Receivable<\/strong> to Notes Receivable<\/strong>, reflecting the new formal agreement.<\/p>\n\n\n\n
At year-end (Dec. 31, 2024)<\/strong>, interest had accrued for 25 days (Dec 6\u201331). The interest ($18,000 \u00d7 6% \u00d7 25\/360 = $90) was recorded using an adjusting entry<\/strong> to recognize interest earned but not yet received. It was also closed to Income Summary<\/strong>.<\/p>\n\n\n\n
On Mar. 6, 2025<\/strong>, CC collected the maturity value<\/strong> of the note: principal + total interest ($18,000 + $270). Part of the interest was previously accrued, and the rest was recognized now.<\/p>\n\n\n\n
Later, CC made a new loan<\/strong> to Lincoln Music for $11,000 on Jun. 30<\/strong>, creating another note receivable. On Oct. 2<\/strong>, a product sale to Tusk Music was converted to a 60-day note.<\/p>\n\n\n\n
However, Tusk Music dishonored<\/strong> the note on Dec. 1<\/strong>, requiring the amount (including interest) to be transferred back to Accounts Receivable<\/strong>. Since it was uncollectible, CC wrote it off<\/strong> using the allowance method<\/strong>, decreasing both Accounts Receivable<\/strong> and Allowance for Doubtful Accounts<\/strong>.<\/p>\n\n\n\n
Finally, on Dec. 30<\/strong>, CC collected the full maturity value of the Lincoln Music<\/strong> note, including the interest of $2,100, completing the transaction.<\/p>\n\n\n\n
This problem illustrates key aspects of notes receivable accounting<\/strong>, including adjusting entries, recognition of interest revenue, dishonored notes, and the write-off process using the allowance method.<\/p>\n\n\n\n
\"\"<\/figure>\n","protected":false},"excerpt":{"rendered":"
P-F:8-34A Accounting for notes receivable, dishonored notes, and accrued interest revenue (Learning Objective 4) Consider the following transactions for CC Publishing. 2024 Dec. 6 Received a $18,000, 90-day, 6% note in settlement of an overdue accounts receivable from Go Go Publishing. Made an adjusting entry to accrue interest on the Go Go Publishing note. Made […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"site-sidebar-layout":"default","site-content-layout":"","ast-site-content-layout":"default","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","ast-disable-related-posts":"","theme-transparent-header-meta":"","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"default","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"ast-content-background-meta":{"desktop":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"footnotes":""},"categories":[25],"tags":[],"class_list":["post-219149","post","type-post","status-publish","format-standard","hentry","category-exams-certification"],"_links":{"self":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts\/219149","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/comments?post=219149"}],"version-history":[{"count":0,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts\/219149\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/media?parent=219149"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/categories?post=219149"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/tags?post=219149"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}