On March 15,Diego paid $4,750 to Island,Inc.to fulfill his promissory note agreement.Of the $4,750,$750 is interest.The journal entry Island,Inc.will record is to:

Question

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The journal entry should reflect the payment of both the principal amount of the promissory note and the interest that has accumulated. Therefore, the $4,750 cash received should be debited and credited to the Note Receivable/Diego account for the principal amount of $4,000 and the Interest Revenue account for the interest amount of $750.

On March 15,Diego Paid $4,750 to Island,Inc