Specialty Inc.converts an existing account receivable to a note receivable to allow an extended payment period.Specialty receives a $2,000,3-month,12% promissory note from its customer.What entry will Specialty make upon receipt of the note?
A)Debit Notes Receivable and credit Accounts Receivable for $2,060.
B)Debit Accounts Receivable and credit Notes Receivable for $2,000.
C)Debit Notes Receivable for $2,000,debit Interest Receivable for $60,credit Accounts Receivable for $2,000,and credit Interest Revenue for $60.
D)Debit Notes Receivable and credit Accounts Receivable for $2,000.

Question

Quizplus · Accepted Answer

The entry includes a debit to Notes Receivable and a credit to Cash for $2,000.No interest is recorded on the day the note is established.Interest is earned over time.