Answer :
On November 1, Orange Corp. sold goods on account to Apple. Orange agreed to accept $40,000, 12%, a 3-month interest-bearing note from apple in payment for the goods. Orange has a December 31 year-end. on February 1, year 2, when the note matures, the journal entry for orange will include a credit to interest revenue, $400.
The word "note receivable" refers to an asset account associated with an underlying promissory note that sets forth in writing the terms of payment for a purchase between the "maker" of the note and the "payee," who is typically a business and is occasionally referred to as a creditor (usually a customer or employee, and sometimes called a debtor).
On the balance sheet of the business to whom the note is owed, a note that is due in less than a year is regarded as a current asset. It is regarded as a non-current asset if its due date is greater than a year from now.
On the income statement, interest income on receivable notes is recorded. As a result, when a note receivable is paid, it has an impact on both the income statement and the balance sheet.
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