Question: Xavier Limited accepts a three-month, 6%, $40,000 note receivable in settlement of an account receivable on April 1, 2012. Interest is due at maturity. (a)

Xavier Limited accepts a three-month, 6%, $40,000 note receivable in settlement of an account receivable on April 1, 2012. Interest is due at maturity.

(a) Prepare the journal entries required by Xavier Limited to record the issue of the note on April 1, and the settlement of the note on July 1, assuming the note is honoured. No interest has previously been accrued. Round your answers to the nearest dollar.

(b) Repeat part (a) assuming that the note is dishonoured, but eventual collection is expected.

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