If a 15%,two-month note receivable is acquired from a customer in settlement of an existing account receivable of $5,000,the accounting entry for acquisition of the note will:
A)Include a debit to Notes Receivable for $5,750.
B)Include a debit to Notes Receivable for $5,062.50.
C)Include a credit to Interest Revenue for $62.50.
D)Include a debit to Notes Receivable for $5,000 and no entry for interest.

Question

Quizplus · Accepted Answer

The note receivable is recorded at its face value of $5,000. Interest is not recorded at the time of acquisition but rather recognized over time.

If a 15%,two-Month Note Receivable Is Acquired from a Customer