Question

Accompanying a bank statement for Borden Company is a credit memo for $21,200 representing the principal ($20,000) and interest ($1,200) on a note that had been collected by the bank. The company had been notified by the bank at the time of the collection but had made no entries. Journalize the entry that should be made by the company to bring the accounting records up to date. If an amount box does not require an entry, leave it blank. Cash Notes Receivable Interest Revenue

Answer 1

Answer: Please refer to Explanation

Explanation:

The above transaction refers to a Note being collected by a bank on behalf of the company. This means that the company's cash balance has therefore increased leading to a journal entry of,

DR Cash $21,200

CR Note Receivables $20,000

CR Interest Revenue $1,200

(To record Note Received by Bank).