Topic: Notes Receivable Discounting

Mortal Company provided the following transactions:

March 14 Sale of merchandise, $2,050,000 to a customer, FOB destination 2/10, n/30

April 7 Receipt of a 60-day, 12% note dated April 5 from the customer. The face of the note was the amount of the invoice minus freight charge of $50,000 paid by the customer in connection with the March 14 sale.

April 20 The note was discounted with the bank at 15%.

June 4 Receipt of notification from the bank that the customer dishonored the note. Accordingly, the entity paid the bank the amount due including protest fee and other charges of $10,000.

July 4 Receipt of cash from the customer for the full amount of indebtedness plus interest on the original face value.

Required:

Prepare journal entries to record the transaction assuming any discounting of note receivable is accounted for as a conditional sale with recognition of a contingent liability.