Chapter 9, Problem 15EB

Rain T-Shirts issued a $440,600 note on January 1, 2018 to a customer, Larry Potts, in exchange for merchandise. The merchandise had a cost to Rain T-Shirts of $220,300. The terms of the note are 24-month maturity date on December 31, 2019 at a 4.5% annual interest rate. Larry Potts does not pay on his account and dishonors the note. Record journal entries for Rain T-Shirts for the following transactions.

A. Initial sale on January 1, 2018

B. Dishonored note entry on January 1, 2020, assuming interest has not been recognized before note maturity