A company sells merchandise on a deferred payment plan,ultimately receiving $5,000 on the account receivable.On the payment date,the company would
A) credit Accounts Receivable for less than $5,000.
B) debit Interest Income for the imputed amount.
C) credit Sales for less than $5,000.
D) debit the asset account for $5,000.

Question

Quizplus · Accepted Answer

Since the customer made a payment on the account receivable, the company needs to reduce the balance in the Accounts Receivable account. Therefore, the company would credit Accounts Receivable for less than $5,000. The other options are not applicable in this scenario as there is no indication of interest income, a decrease in sales, or a need to debit the asset account for the full amount of $5,000.

A Company Sells Merchandise on a Deferred Payment Plan,ultimately Receiving