Brooke Company Grants James Decorating Additional Time to Pay Its

question 51

Multiple Choice

Brooke Company grants James Decorating additional time to pay its past due account. James makes a written promise to pay Brooke the amount on a certain date. Brooke Company records this transaction as follows:

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

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Definitions:

AASB 16

The Australian Accounting Standards Board standard concerning leases, requiring lessees to recognize assets and liabilities for most leases.

IFRS 16

An International Financial Reporting Standard that specifies how an organization should report leases in its financial statements.

Lease Receivable

An asset account that records the amounts due to the lessor from the lessee under the terms of a lease agreement.

Lease Agreement

A contract in which one party, the lessor, allows another party, the lessee, to use an asset for a specified period of time in exchange for payments.