On April 12, Hong Company Agrees to Accept a 60-Day

question 144

Multiple Choice

On April 12, Hong Company agrees to accept a 60-day, 10%, $4,500 note from Indigo Company to extend the due date on an overdue account.
- What is the journal entry that Indigo Company would make, when it records payment of the note on the maturity date? (Use 360 days a year.)

• A) Debit Cash $4,575; credit Interest Revenue $75; credit Notes Payable $4,500.
• B) Debit Notes Payable $4,500; credit Interest Expense $75, credit Cash $4,425.
• C) Debit Notes Payable $4,500; debit Interest Expense $75; credit Cash $4,575.
• D) Debit Cash $4,575; credit Interest Revenue $75; credit Notes Receivable $4,500.
• E) Debit Notes Payable $4,500; debit Interest Expense $112; credit Cash $4,612.

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Definitions:

Second-degree Price Discrimination

A pricing strategy where prices vary according to quantity sold or consumed, size, or version of the product, not directly by consumer identity.

Quantity Blocks

Predefined quantities of goods or services, often used in pricing or packaging.

Third-degree Price Discrimination

A pricing strategy where different prices are charged to different groups of customers based on their willingness to pay.

Elasticity of Demand

A measure of how much the quantity demanded of a good responds to changes in its price, indicating the sensitivity of consumers to price changes.