Teller purchased merchandise from TechCom on October 17 of the current year and TechCom accepted Teller's $4,800, 90-day, 10% note. What entry should TechCom make on January 15 of the next year when the note is paid?
A) Debit Notes Receivable $4,800; debit Interest Receivable $120; credit Sales $4,920.
B) Debit Cash $4,920; credit Notes Receivable $4,920.
C) Debit Cash $4,920; credit Interest Revenue $100; credit Interest Receivable $20; credit Notes Receivable $4,800.
D) Debit Cash $4,920; credit Interest Revenue $20; credit Interest Receivable $100; credit Notes Receivable $4,800.
E) Debit Cash $4,920; credit Interest Revenue $120; credit Notes Receivable $4,800.

Question

Quizplus · Accepted Answer

The note's interest for 90 days is $120 ($4,800 x 10% x 90/360). By January 15, 75 days have passed in the previous year, accruing $100 interest, and 15 days in the current year, accruing $20 interest. Thus, TechCom should credit $100 to Interest Receivable and $20 to Interest Revenue.

Teller Purchased Merchandise from TechCom on October 17 of the Current