EX 9-21 Entries for notes receivable

The series of seven transactions recorded in the following T accounts were related to a sale to a customer on account and the receipt of the amount owed. Briefly describe each transaction.

CASH NOTES RECEIVABLE (7) 40,602 (5) 40,000 (6) 40,000
ACCOUNTS RECEIVABLE SALES RETURNS AND ALLOWANCES (1) 50,000 (3) 10,000 (3) 10,000 (6) 40,400 (5) 40,000 (7) 40,400
MERCHANDISE INVENTORY COST OF MERCHANDISE SOLD (4) 6,000 (2) 30,000 (2) 30,000 (4) 6,000
SALES INTEREST REVENUE (1) 50,000 (6) 400 (7) 202
Answer:

1. Sale on account.
2. Cost of merchandise sold for the sale on account.
3. A sale return or allowance.
4. Cost of merchandise returned.
5. Note received from customer on account.
6. Note dishonored and charged maturity value of note to customer’s account receivable.
7. Payment received from customer for dishonored note plus interest earned after due date. 

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