On November 1, Orpheum Company accepted a $10,000, 90-day, 8% note from a customer settle an account. What entry should be made on the November 1 to record the acceptance of the note?

Question

Quizplus · Accepted Answer

When a company accepts a note receivable, it is essentially a promise to receive cash in the future. Therefore, the November 1 entry should record the increase in the note receivable account and the decrease in the accounts receivable account. No interest revenue should be recognized at this point, as it has not yet been earned. The correct entry is:
Debit Note Receivable $10,000; credit Accounts Receivable $10,000.

On November 1, Orpheum Company Accepted a $10,000, 90-Day, 8