On July 9,Mifflin Company receives an $8,500,90-day,8% note from customer Payton Summers as payment on account.What entry should be made on the maturity date assuming the maker pays in full,and no adjusting entries have been made related to the note? (Use 360 days a year.)
A)Debit Notes Receivable $8,500; debit Interest Receivable $170; credit Sales $8,670.
B)Debit Cash $8,670; credit Interest Revenue $170; credit Notes Receivable $8,500.
C)Debit Cash $8,628; credit Interest Revenue $128; credit Notes Receivable $8,500.
D)Debit Cash $8,613; credit Interest Revenue $113; credit Notes Receivable $8,500.
E)Debit Cash $8,500; credit Notes Receivable $8,500.

Question

Quizplus · Accepted Answer

The customer Payton Summers paid the full amount of the note, which includes the principal plus interest. The interest is calculated using the formula: Principal x Rate x Time = Interest. In this case, the principal is $8,500, the rate is 8%, and the time is 90/360 (since it is a 90-day note and we use a 360-day year). So the interest is $170. Therefore, the journal entry to record the payment in full would be:

Debit Cash $8,670 
Credit Interest Revenue $170 
Credit Notes Receivable $8,500

On July 9,Mifflin Company Receives an $8,500,90-Day,8% Note from Customer