Valley Spa purchased $8700 in plumbing components from Tubman Co. Valley Spa signed a 60-day, 14% promissory note for $8700. If the note is dishonored, but Tubman intends to continue collection efforts, what is the journal entry to record the dishonored note? (Use 360 days a year.)
A. Debit Accounts Receivable-Valley Spa $8700; credit Notes Receivable $8700.
B. Debit Accounts Receivable-Valley Spa $8903, credit Interest Revenue $203; credit Notes Receivable $8700.
C. Debit Bad Debt Expense $8903; credit Accounts Receivable $8903.
D. Debit Accounts Receivable $8903; debit Bad Debt Expense $203; credit Notes Receivable $8700.
E. Debit Bad Debt Expense $8700; credit Notes Receivable $8700.
Answer: B
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