On August 2, Jun Co. receives a $7,000, 90-day, 11.5% note from customer Ryan Albany as payment on his $7,000 account. Prepare Jun's journal entry assuming the note is honored by the customer on October 31 of that same year.

Journal entry to record receipt of notes receivable on August 2

Date             Description                        Debit      Credit

August 2    Notes Receivable                $7,000

                       Account Receivables                     $7,000    

Journal entry to record note receivables honored by the customer

Date             Description                        Debit          Credit

October 31   Cash                                   $7,198.49

                        Notes Receivables                           $7,000

                        Interest Receivables                        $198.49

Workings

Interest = Principal amount * Periodic interest rate

Interest = $7,000 * 11.5% * 90/365

Interest = $198.49

Hence, the interest on note receivables is $198.49

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