If a 5%, 120-day note receivable is acquired from a customer in settlement of an existing account receivable of $50,000, the accounting entry for acquisition of the note will:
A) Include a debit to Notes Receivable for $50,822.
B) Include a debit to Notes Receivable for $50,208.
C) Include a credit to Interest Revenue for $822.
D) Include a debit to Notes Receivable for $50,000 and no entry for interest.

Question

Quizplus · Accepted Answer

The note receivable is recorded at its face value of $50,000. Interest is not recorded at the time of acquisition but is recognized over time.

If a 5%, 120-Day Note Receivable Is Acquired from a Customer