Valley Spa purchased $7,800 in plumbing components from Tubman Co. Valley Spa signed a 60-day, 10% promissory note for $7,800. 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 $7,930; debit Bad Debt Expense $130; credit Notes Receivable $8,060.
B. Debit Bad Debt Expense $7,800; credit Notes Receivable $7,800.
C. Debit Accounts Receivable-Valley Spa $7,930, credit Interest Revenue $130; credit Notes Receivable $7,800.
D. Debit Accounts Receivable-Valley Spa $7,800; credit Notes Receivable $7,800.
E. Debit Bad Debt Expense $7,930; credit Accounts Receivable $7,930.
Answer: C
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