Jax Recording Studio purchased $7,800 in electronic components from Music World.Jax signed a 60-day,8% promissory note for $7,800.Music World's journal entry to record the collection on the maturity date is:
A)Debit Cash $7,800;credit Accounts Receivable $7,800
B)Debit Accounts Receivable $7,904;credit Notes Receivable $7,800;credit Interest Receivable $104
C)Debit Notes Receivable $7,800;credit Cash $7,904;credit Interest Revenue $104
D)Debit Cash $7,904;credit Notes Receivable $7,800;credit Interest Revenue $104
E)Debit Cash $7,904;credit Notes Receivable $7,904

Question

Quizplus · Accepted Answer

On the maturity date, Jax Recording Studio will pay the full amount of the promissory note ($7,800) plus the interest accrued (8% for 60 days, which is $104). Therefore, Music World will record a debit to Cash for the total amount received ($7,904) and a credit to Notes Receivable for the principal amount of the loan ($7,800) and a credit to Interest Revenue for the interest earned ($104).

Jax Recording Studio Purchased $7,800 in Electronic Components from Music