Your company lent a customer $5,000 to satisfy the customer's overdue accounts receivable.The loan is for one year at an annual interest rate of 5%.Six months later the customer repays the principal and interest.The principal part of the repayment should be recorded as a:
A)debit to Cash and credit to Notes Receivable.
B)debit to Notes Receivable and credit to Interest Revenue.
C)debit to Cash and credit to Accounts Receivable.
D)debit to Allowance for Bad Debts and credit to Cash.

Question

Quizplus · Accepted Answer

Since the customer repays both the principal and interest, the principal part of the repayment should be recorded as a debit to Cash (which increases) and credit to Notes Receivable (which decreases, since the loan has been repaid).

Your Company Lent a Customer $5,000 to Satisfy the Customer's