A Note Receivable Is Executed in December

question 3

Multiple Choice

A note receivable is executed in December. When the note is paid the following February, the payee's entry includes (assuming a calendar-year accounting period and no reversing entries) a

• A) credit to Interest Receivable.
• B) credit to Cash.
• C) debit to Notes Receivable.
• D) debit to Interest Income.

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Definitions:

Contra Revenue Account

An account that is offset against a revenue account on the income statement.

Sales Returns

Goods returned by customers to the seller after the sale, often due to defects, not meeting the buyer's needs or other reasons.

Cash Sale

A transaction in which goods or services are paid for and received at the time of sale, using cash or its equivalents.

Discount Period

The time frame within which a payment can be made at a reduced rate before it reverts to the full price.