Jasper's entry to record the collection of the note and interest at maturity should be: $\bold{\text{(Use 360 days a year.) }}$

A) Debit Cash for $25,000; credit Notes Receivable $25,000.
B) Debit Cash $25,437.50; credit Interest Revenue $437.50; credit Notes Receivable $25,000.
C) Debit Cash $25,437.50; credit Notes Receivable for $25,437.50.
D) Debit Notes Payable $25,000; Debit Interest Expense $1,750; credit Cash $26,750.
E) Debit Cash $26,750; credit Interest Revenue $1,750,credit Notes Receivable $25,000.

Question

Jasper's entry to record the collection of the note and interest at maturity should be:

\bold{\text{(Use 360 days a year.) }}

A) Debit Cash for $25,000; credit Notes Receivable $25,000.
B) Debit Cash $25,437.50; credit Interest Revenue $437.50; credit Notes Receivable $25,000.
C) Debit Cash $25,437.50; credit Notes Receivable for $25,437.50.
D) Debit Notes Payable $25,000; Debit Interest Expense $1,750; credit Cash $26,750.
E) Debit Cash $26,750; credit Interest Revenue $1,750,credit Notes Receivable $25,000.

David Brown · Accepted Answer

Final Answer : B, Explanation :  At maturity, Jasper would receive the principal amount of $25,000 plus interest for 90 days at a rate of 7%. Using a 360-day year, the interest can be calculated as:$25,000 x 0.07 x (90/360) = $437.50Jasper's journal entry would be:Debit Cash $25,437.50Credit Interest Revenue $437.50Credit Notes Receivable $25,000This entry records the collection of both the principal amount and interest earned on the note.

Definitions

Learning Objectives

Learning Objectives

Related questions