Jeff Company Issues a Promissory Note to David Company to Get

question 123

Multiple Choice

Jeff Company issues a promissory note to David Company to get extended time on an account payable. Jeff Company records this transaction as follows:

• A) debit Accounts Receivable; credit Notes Receivable.
• B) debit Notes Receivable; credit Accounts Receivable.
• C) debit Notes Payable; credit Accounts Payable.
• D) debit Accounts Payable; credit Notes Payable.

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Definitions:

Net Income

is the profit a company makes after deducting all costs and expenses from its total revenue, including taxes and interest.

Interest Expense

The cost incurred by an entity for borrowed funds, which can include payments on loans, bonds, or lines of credit.

Return on Common Stockholders' Equity

A measure of profitability that indicates how much profit a company generates with the money shareholders have invested.

Return on Total Assets

A financial ratio that measures a company's profitability in relation to its total assets, indicating how efficiently assets are used to generate profit.