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Recourse obligation on notes receivable
I have a test question worded this way I need some help or explanation on
Notes receivabel not paid at maturity, note is $3,000 on which the company had to pay the bank $3,090. Which included interest and protest fees, How would you journalize this is this correct Obligation on discounted notes receivable 3090(DR), Credit cash 3,090 |
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I am not sure but I think it will be like this:
You mean Notes Receivable or Notes Payable? If the compnay has to pay, it must be Payables. In that case, you credit Cash with the amount paid. You debit Notes payable with $3000. You debit Interest Payable with the amount of interest. You also debit some appropriate Expense account with the amount of penalty. |
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