The receipt of the check in settlement of the promissory note will include a debit to cash, credit to notes receivable, and credit to the interest as the interest would also be recieved on the promissory note.
A promissory note is an instrument of debt that shows the promise to pay a certain sum of money to the person holding the instrument and the date when this instrument will be due or on demand. This means that money written on the promissory note can either be collected on the date specified or on demand of the promissory note.
So when this instrument is provided back to the issuer, the issuer is supposed to make a debit of the cash account in the books of account to show that cash has entered the business. It shows credit to the promissory note to cancel the promissory note. Further, it should credit the interest of the instrument to signify that the interest has also been collected.
Learn more about the promissory note here:
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