Included in WWC's February 1 Accounts Receivable balance is a $2,000 account due from Kit Kat, a WWC customer. Kit Kat is having cash flow problems and cannot pay its balance at this time. WWC arranges with Kit Kat to convert the $2,000 balance to a note. And Kit Kat signs a 6-month not, at 12% interest. The interest will be due and payable to WWC on August 1 2008.

I thought that I would need to credit Accounts receivable and create a note entry except that it would be credited as well which I know isn't right. I can't find what I'm missing. Can you tell me what the journal entry would look like?

You would credit Accounts Receivable for the amount and Debit Notes Receivable for the amount because the customer no longer owes on account, instead the customer signed a note