On August 9, Pierce Company receives a $8,500, 90-day, 8% note from customer Eric Simms as payment on his account. What entry should be made on the maturity date assuming the maker pays in full?

Question

Quizplus · Accepted Answer

On the maturity date, assuming the maker pays in full, the entry should be a debit to cash for the full amount of $8,670, a credit to notes receivable for the principal amount of $8,500 and a credit to interest revenue for the interest earned, which is calculated as follows:

Interest = Principal x Rate x Time
Interest = $8,500 x 8% x 90/360
Interest = $170

Therefore, the correct entry is:
Debit Cash $8,670; credit Interest Revenue $170; credit Notes Receivable $8,500.

On August 9, Pierce Company Receives a $8,500, 90-Day, 8