Springz Company received a 120-day, 9 percent note for $1,200, dated March 18, from Jenny, a charge customer, to satisfy his open account receivable. Which of the following journal entries records the receipt of the note in the general journal of Springz Company?
A) Debit Notes Receivable by $1,236; credit Accounts Receivable, Jenny by $1,200, Interest Income by $36
B) Debit Cash by $1,200; credit Accounts Receivable, Jenny by $1,200
C) Debit Notes Receivable by $1,200; credit Accounts Receivable, Jenny by $1,200
D) Debit Notes Receivable by $1,164; credit Accounts Receivable, Jenny by $1,164

Question

Quizplus · Accepted Answer

When a business receives a note receivable, it is recorded by debiting Notes Receivable and crediting the customer's account, in this case, Accounts Receivable, Jenny. Option A records an additional interest income, which is not appropriate at this time. Option B records a cash payment, which is incorrect since Springz Company received a note receivable, not cash. Option D records an incorrect amount, which suggests a miscalculation of the interest or the principal amount of the note. Therefore, the best choice is option C.

Springz Company Received a 120-Day, 9 Percent Note for $1,200