On June 8, Alton Co. issued an $80,000, 6%, 120-day note payable on an overdue account payable to Seller Co. Assume that the fiscal year of Alton Co. ends June 30. Which of the following relationships is true?

Question

Quizplus · Accepted Answer

Alton Co. is the borrower and therefore must debit the Notes Payable account, which is a liability. The 6% interest expense will be recorded separately as an adjusting entry at the end of the fiscal year on June 30. The transaction has no impact on the Accounts Receivable or Accounts Payable accounts.