On March 17, Grady Company agrees to accept a 60-day, 10%, $4,500 note from Alert Company to extend the due date on an overdue account. What is the journal entry needed to record the payment of the note by Alert Company on the maturity date?

Question

Quizplus · Accepted Answer

The correct answer is A because on the maturity date, the company will receive the payment of the note, which includes both the principal amount of $4,500 and the interest expense of $75. The journal entry to record this transaction would be to debit Notes Payable for $4,500, debit Interest Expense for $75, and credit Cash for $4,575.

On March 17, Grady Company Agrees to Accept a 60-Day