On july 9, mifflin company receives a $8,500, 90-day, 8% note from customer payton summers as payment on account. what entry should be made on july 9 to record receipt of the note?

Dr Cash $8,670

Cr Interest Revenue $170

Cr Note Receivable $8,500        

Explanation:

As we know that the interest given is for a year, so we should calculate the interest rate for a unit month, which is calculated as under:

Interest per month = 0.08/12 = 0.0067

Interest revenue = Note Value * Interest rate per month * Number of months

Interest revenue = $8,500 * 0.0067 * 3

Interest revenue = $170

The double entry would be as under:

Dr Cash $8,670 ($8,500 Note Value + $170 Interest Revenue)

Cr Interest Revenue $170

Cr Note Receivable $8,500

July 9, promissory note received from Payton Summers

Dr Notes receivable 8,500

    Cr Accounts receivable 8,500

Explanation:

Since the note is received as payment for an account receivable, you must increase notes payable (debit) and decrease accounts receivable (credit). This note is a current account that is due in 90 days, so it must be recorded at face value.

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