You are the owner of a small retail food store and have several large companies with whom you do business. Many competitors in your industry are vying for your customers’ business. For each sale, you issue notes receivable to the company, with an interest rate of 10% and a maturity date 12 months after the issue date. Each note has a minimum principal amount of $100,000.
For this discussion, let’s assume that one of these companies is unable to pay in the established timeframe and dishonors the note. What would you do? How does this dishonored note affect your company both financially and nonfinancially? If your customer wanted to renegotiate the terms of the agreement, would you agree? If so, what would be the terms?
You are not required to journal the transaction, simply provide your rationale in response to the questions.
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