On March 1, 2008, Murat Motors sold, on account, automobile engine products to H

Question

On March 1, 2008, Murat Motors sold, on account, automobile engine products to Halloran Industries for $8,000. At that time Murat expected to receive payment in thirty days. On april1, 2008, Halloran paid $2,000 of the amount due. Murat agreed to convert the remaining balance into a four-month note, with terms of 12 %( annual) interest, all payable on July 31, 2008. Record the entry establishing the note on Murat Motors records. The entry recording the initial payment is shown below:
Debit Credit
Cash $2,000
Accounts Receivable $2,000

Explanation / Answer

You will Debit Notes Receivable 6,000 and Credit the Accounts Receivable 6000.

 

 

 

 

 

 

 

Here is how the ledger should look and hopefully all my formatting will stay:

 

 

 

DATE           Notes Receivable-Halloran Industries..........6,000
                           Accounts Receivable-Halloran Industries ...........6,000

 

 

 

 

 

 

 

Hope that helps :)

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