Answer: Please see explanation column for answer
Explanation:
Interest amount =Principal (note amount) x rate x period
= $10,800 x 10% x 60/360 = $180
journal entry to record the dishonored note
Account Debit Credit
Account receivable - valley spa $10,980
Interest Revenue $180
Notes receivable $10,800
Account receivable= $10,800 +$180 =$10,980
Here, the company intends to continue with collection efforts, so the amount would be classified as the dishonored note as part of accounts receivable by Debiting the accounts receivable which would be the total of the principle and interest owed also crediting the notes receivable account for the principle amount and the interest revenue account for the interest amount.
