Question
Lynbrook Automotive sells a variety of merchandise to retail stores on account, but it insists that any customer who fails to pay an invoice when
Lynbrook Automotive sells a variety of merchandise to retail stores on account, but it insists that any customer who fails to pay an invoice when due must replace it with an interest-bearing note. The company adjusts and closes its accounts at December 31.
On November 1, 2019 Lynbrook converted an Accounts Receivable balance from Scan House in the amount of $5,000 to a 120 day 8% Note Receivable.
Required: A. Prepare journal entries (in general journal form) to record: (1) the creation of the note on November 1, 2019; (2) the adjustment for interest on December 31, 2019; (3) the collection of principal and interest when it matures in 2020, including the maturity date. (Lynbrook makes adjusting entries only at year-end.) B. Explain why Lynbrook insists that any customer who fails to pay an invoice when due must replace it with an interest-bearing note.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started