On January 1, a customer asked your company to convert the $200,000 they owe you into...
On January 1, a customer asked your company to convert the $200,000 they owe you into a promissory note. The amount will be due 6 months from now and you will charge them 8% interest to be paid when the principal is due. What entry will be made when the note is paid back? Note that your company has a year-end of December 31.
Select one:
a. Debit Cash $208,000, Credit Note Receivable $200,000, Credit Interest Revenue $8,000
b. Debit Cash $200,000, Debit Interest Revenue $8,000, Credit Note Receivable $200,000, Credit Interest Receivable $8,000
c. Debit Cash $208,000, Credit Note Receivable $200,000, Credit. Interest Receivable $200,000
d. Debit Note Receivable $200,000, Credit Interest Receivable $8,000, Credit Cash $200,000, Credit Interest Revenue $8,000
Homework Answers
| Interest On Promissory note = $200000*8%*6*12 =$8000 | ||||
| Journal Entry | ||||
| Date | Account Title | Debit | Credit | |
| Dec-31 | Cash | $ 2,08,000 | ||
| Note Receivables | $ 2,00,000 | |||
| Interest Revenue | $ 8,000 | |||
| ( to record cash received against note receivables plus interest) | ||||
| Correct Option = a | ||||
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