Asked by Itzamar Gutierrez on Jun 18, 2024
Verified
On November 1,Orpheum Company accepted a $10,000,90-day,8% note from a customer to settle his account.What entry should be made on the November 1 to record the acceptance of the note?
A) Debit Note Receivable $10,000; credit Cash $10,000.
B) Debit Note Receivable $10,000; credit Accounts Receivable $10,000.
C) Debit Note Receivable $10,000; credit Sales $10,000.
D) Debit Note Receivable $10,200; credit Accounts Receivable $10,000; credit Interest Revenue $200.
E) Debit Sales $10,000; credit Accounts Receivable $10,000.
Note Receivable
A written promise that entitles the holder to receive a specified amount of money at a set date in the future, often bearing interest.
90-Day Note
A short-term debt obligation that matures in 90 days.
Settle Account
The process of paying off or resolving a financial account or obligation.
- Determine and document activities linked to notes receivable, such as interest calculations and the treatment of dishonored notes.
Verified Answer
JM
Jayla MorrisJun 21, 2024
Final Answer :
B
Explanation :
When a company accepts a note receivable in settlement of an account, it debits Note Receivable for the principal amount of the note and credits the corresponding Accounts Receivable, indicating that the customer's outstanding balance has been settled by the issuance of a note.
Learning Objectives
- Determine and document activities linked to notes receivable, such as interest calculations and the treatment of dishonored notes.