Paoli Pizza bought $5,000 worth of merchandise from TechCom and signed a 90-day, 10% promissory note for the $5,000. TechCom's journal entry to record the sales portion of the transaction is:

Question

Quizplus · Accepted Answer

The journal entry to record a sale made on credit with a promissory note is to debit Notes Receivable for the amount of the note plus any interest and credit Sales for the total amount. Therefore, the journal entry is to Debit Notes Receivable $5,000 and Credit Sales $5,000. Since the note is for 90 days with a 10% rate, interest will also be recorded separately when the note is collected.

Paoli Pizza Bought $5,000 Worth of Merchandise from TechCom and Signed