Giorgio Italian Market bought $4,000 worth of merchandise from Food Suppliers and signed a 90-day,6% promissory note for the $4,000.Food Supplier's journal entry to record the sales transaction is:
A)Debit Accounts Receivable $4,000;credit Sales $4,000
B)Debit Notes Receivable $4,000;credit Sales $4,000
C)Debit Accounts Receivable $4,060;credit Sales $4,060
D)Debit Notes Receivable $4,060;credit Sales $4,060
E)Debit Notes Receivable $4,000;debit Interest Receivable $60;credit Sales $4,060

Question

Quizplus · Accepted Answer

The correct entry is to debit Notes Receivable for the principal amount of $4,000 and credit Sales for the same amount, as the interest is not recorded until it is earned.

Giorgio Italian Market Bought $4,000 Worth of Merchandise from Food