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

Anis Aqilah Nizam Shah · Accepted Answer

Final Answer : B, Explanation :  The correct journal entry for Food Supplier to record the sales transaction involving a promissory note is to debit Notes Receivable for the principal amount of the note ($4,000) and credit Sales for the same amount ($4,000). This entry reflects the increase in Notes Receivable due to the promissory note and the increase in Sales from the merchandise sold. Interest is not recorded at the time of the sale but rather over the life of the note or when it is realized.

Definitions

Learning Objectives

Learning Objectives

Related questions