Jax Recording Studio purchased $7,800 in electronic components from Music World.Jax signed a 60-day,8% promissory note for $7,800.Music World's journal entry to record the collection on the maturity date is:
A)Debit Cash $7,800; credit Accounts Receivable $7,800
B)Debit Accounts Receivable $7,904; credit Notes Receivable $7,800; credit Interest Receivable $104
C)Debit Notes Receivable $8,008; credit Cash $7,904; credit Interest Revenue $104
D)Debit Cash $7,904; credit Notes Receivable $7,800; credit Interest Revenue $104
E)Debit Cash $7,904; credit Notes Receivable $7,904

Question

Quizplus · Accepted Answer

Since Jax Recording Studio purchased $7,800 in electronic components from Music World and signed a 60-day, 8% promissory note, Music World will receive $7,800 plus 8% interest ($624) on the maturity date.

The journal entry to record the collection on the maturity date would be:

Debit Cash $7,904 (7,800 + 624)
Credit Notes Receivable $7,800 (principal amount)
Credit Interest Revenue $104 (8% of principal for 60 days)

Jax Recording Studio Purchased $7,800 in Electronic Components from Music