A buyer pays a note in full on its maturity date. The buyer would record a:
A) debit to Cash; credit to Interest Income; credit to Notes Receivable.
B) debit to Interest Expense; credit to Cash; credit to Notes Payable.
C) debit to Notes Receivable; credit to Cash; credit to Interest Income.
D) debit to Interest Expense; debit to Notes Payable; credit to Cash.

Question

Quizplus · Accepted Answer

When a buyer pays a note in full on its maturity date, they are settling the principal amount of the note (Notes Payable) and paying the interest accrued on that note (Interest Expense). Both of these amounts are debited to reflect a decrease in liability (Notes Payable) and an expense (Interest Expense), respectively. Cash is credited to reflect the outflow of cash to settle the note and interest.

A Buyer Pays a Note in Full on Its Maturity