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On July 9, Mifflin Company receives a $8,600, 90-day, 12% note from customer Payton Summers as payment on account. What entry should be made on July 9 to record receipt of the note

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Answer:

Mifflin Company

Journal Entry:

Debit Notes Receivable (Payton Summers)$8,600

Credit Accounts Receivable (Payton Summers)$8,600

To record the receipt of a 90-day, 12% note.

Explanation:

Mifflin Company uses this journal entry to record the receipt of a note receivable from Payton Summers in payment on account.  This effectively transfers the debit from Accounts Receivable account to a Notes Receivable account.  By this action, the debt is formalized while Mifflin Company is now able to charge interest on the unsettled balance at the agreed rate per annum.

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