When a company receives an interest-bearing note receivable, it will
A)debit Notes Receivable for the maturity value of the note.
B)credit Notes Receivable for the maturity value of the note.
C)debit Notes Receivable for the face value of the note.
D)credit Notes Receivable for the face value of the note.

Question

Quizplus · Accepted Answer

When a company receives an interest-bearing note receivable, it should debit Notes Receivable for the face value of the note as this is the amount that will be repaid at maturity. The interest earned on the note will be recognized separately as interest revenue over the life of the note. Therefore, the maturity value of the note (which includes both the face value and interest) should not be used to record the initial receipt of the note.

When a Company Receives an Interest-Bearing Note Receivable, It Will