Accent Flooring The company received a promissory note from a customer on March 1,2012.The principal amount of the note is $20,000;the terms are 3 months and 9% annual interest.
-Refer to the information for Accent Flooring.At the maturity date,the customer pays the amount due for the note and interest.What entry is required on the books of Accent Flooring on the maturity date assuming that none of the interest had already been recognized?

Question

Quizplus · Accepted Answer

At maturity, the customer pays the principal amount of $20,000 plus interest of ($20,000 x 9% x 3/12) = $450. Therefore, Accent Flooring would increase its cash by $20,450, increase its interest revenue by $450, and decrease its notes receivable by $20,000. Option B is the only choice that reflects all three transactions. Option A only reflects the decrease in notes receivable, while option C incorrectly shows an increase in notes receivable. Option D is incorrect as an entry is required to record the receipt of cash and recognition of interest revenue.

Accent Flooring the Company Received a Promissory Note from a Customer