On November 1,Orpheum Company accepted a $10,000,90-day,8% note from a customer settle an account.What entry should be made on November 1 to record the acceptance of the note?
A)Debit Note Receivable $10,000; credit Cash $10,000.
B)Debit Note Receivable $10,000; credit Accounts Receivable $10,000.
C)Debit Note Receivable $10,000; credit Sales $10,000.
D)Debit Note Receivable $10,200; credit Accounts Receivable $10,000; credit Interest Revenue $200.
E)Debit Sales $10,000; credit Accounts Receivable $10,000.

Question

Quizplus · Accepted Answer

When a company accepts a note receivable in settlement of an account, it debits Note Receivable for the principal amount of the note and credits Accounts Receivable to remove the amount due from the customer from its accounts receivable balance. Interest is not recognized until it is earned, which would be over the life of the note, not at the time the note is accepted.

On November 1,Orpheum Company Accepted a $10,000,90-Day,8% Note from a Customer