On October 1, 2018, Pipes & Plumbing Company received a 10 percent, six - month note receivable from Kirkman Constructions, one of Pipes & Plumbing Companys problem credit customers. Kirkman had owed $75,000 on an account receivable that had defaulted. Pipes & Plumbing insists that any customer who fails to pay an account receivable when due must replace their unpaid account receivable with an interest - bearing note receivable. Assume the Pipes & Plumbing Company makes adjusting entrie s for accrued interest revenue once a year on December 31.

Journalize the following events on the books of Pipes & Plumbing Company:

1. Record the receipt of the note on October 1 in settl eme nt of the account receivable

2. Record accrued interest at December 31, 2018.

3. Assume that Kirkman Constructions pays the note plus accrued interest in ful l. Record the collection of the principal and interest on April 1, 2019.

4. Assume that Kirkman Constructions did not make the necessary principal and i nterest payment on April 1, 2019, defaulting on his obligation. Record the default on April 1, 2019.

5. Why does Pipes & Plumbing Company insist that any customer who fails to pay must replace their unpaid account receivable with an in terest - bearing note receivable?