On May 18, Rodriguez Co. issued an $84,000, 6%, 120-day note payable on an overdue account payable to Wilson Company. Assume that the fiscal year of Rodriguez ends on June 30. Which of the following relationships is true?
A) Rodriguez is the creditor and credits Accounts Receivable.
B) Wilson is the creditor and debits Accounts Receivable.
C) Wilson is the borrower and credits Accounts Payable.
D) Rodriguez is the borrower and debits Accounts Payable.

Question

Quizplus · Accepted Answer

Rodriguez Co. is the borrower of the note payable, so they would debit Accounts Payable. Wilson Company is the creditor, and they would credit Notes Payable. Neither Accounts Receivable nor Accounts Payable are affected in this transaction. Option B is incorrect because Wilson Company is not owed any money on their Accounts Receivable. Option A is incorrect because Rodriguez Co. is not owed any money on their Accounts Receivable. Option C is incorrect because Wilson Company is not borrowing any money.