When an interest-bearing note comes due and is uncollectible, the journal entry includes...

Question:

When an interest-bearing note comes due and is uncollectible, the journal entry includes debiting:

a. Notes Receivable and crediting Accounts Receivable.

b. Notes Receivable and crediting Accounts Receivable and Interest Revenue.

c. Accounts Receivable and crediting Interest Revenue.

d. Accounts Receivable and crediting Notes Receivable and Interest Revenue.

What Is A Note Receivable:

A company's Note Receivable can be reported as either current or non-current assets depending on their maturity date. A Note Receivable is a formal lending agreement in which the company lends money to a third party with fixed repayments terms.

Answer and Explanation:

The answer is None of the above.

Because the note is not collectible, the journal entry would involve:

Account Dr Cr
Bad debt expense x
Note receivable x

Learn more about this topic:

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Notes Receivable: Definition, Maturity Date & Interest

from Accounting 101: Financial Accounting

Chapter 7 / Lesson 6
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