[Dyanneava]

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?

[pready]

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