On April 1, a firm purchased equipment for $5,000, signing a 60-day note bearing interest at 12 percent. The entry to record the payment of the amount at maturity is (Assume 360 days in a year.)
A)a debit to Notes Payable $5,100 and a credit to Cash for $5,100.
B)a debit to Notes Receivable for $5,000 and a credit to Cash for $5,000.
C)a debit to Accounts Payable $5,000, a debit to Interest Income for $600, and a credit to Cash for $5,600.
D)a debit to Notes Payable for $5,000, a debit to Interest Expense for $100, and a credit to Cash for $5,100.

Question

Quizplus · Accepted Answer

The correct entry involves debiting Notes Payable for the principal amount of $5,000, debiting Interest Expense for the interest accrued ($5,000 * 12% * (60/360) = $100), and crediting Cash for the total amount paid at maturity, which is $5,100.

On April 1, a Firm Purchased Equipment for $5,000, Signing