On October 1 Eli's Carpet Service Borrows $125000 from First $\begin{array}{lrr} \text {Notes Payable } &127,500\\ \text { Cash } &&127,500\\\end{array}$

question 130

Short Answer

On October 1 Eli's Carpet Service borrows $125000 from First National Bank on a 3-month $125000 8% note. The entry by Eli's Carpet Service to record payment of the note and accrued interest on January a.
$\begin{array}{lrr} \text {Notes Payable } &127,500\\ \text { Cash } &&127,500\\\end{array}$

b.
$\begin{array}{lrr} \text { Notes Payable } &125,000\\ \text { Interest Payable} &2,500\\ \text { Cash} &&127,500\end{array}$

c.
$\begin{array}{lrr} \text {Notes Payable } &125,000\\ \text { Interest Payable} &10,000\\ \text { Cash } &&135,000\end{array}$

d.
$\begin{array}{lrr} \text { Notes Payable} &125,000\\ \text { Interest Expense } &2,500\\ \text { Cash } &&127,500\end{array}$

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Definitions:

Allowance for Doubtful Accounts

A contra-asset account that reduces the total receivables reported on the balance sheet by the amount expected not to be collected.

Past Due Time

Past Due Time refers to the period that has elapsed after the official due date of a payment or obligation, signaling a delay in payment.

Collectibility

The likelihood or ability of an entity to collect on its accounts receivable or outstanding debts.

Account

A record in financial accounting that tracks the financial transactions of a specific asset, liability, equity, revenue, or expense.