Specialty Inc

question 33

Multiple Choice

Specialty Inc.converts an existing account receivable to a note receivable to allow an extended payment period.Specialty receives a $2,000,3-month,12% promissory note from its customer.What entry will Specialty make upon receipt of the note?

• A)Debit Notes Receivable and credit Accounts Receivable for $2,060.
• B)Debit Accounts Receivable and credit Notes Receivable for $2,000.
• C)Debit Notes Receivable for $2,000,debit Interest Receivable for $60,credit Accounts Receivable for $2,000,and credit Interest Revenue for $60.
• D)Debit Notes Receivable and credit Accounts Receivable for $2,000.

---

Definitions:

Estimated Activity

The projected level of activity used to allocate overhead costs, often based on metrics such as machine hours or labor hours.

Predetermined Overhead Rate

A rate calculated before a period begins, used to allocate manufacturing overhead to products based on a relevant activity base.

Direct Labor-Hours

The total hours worked by employees directly involved in the production of goods.

Manufacturing Overhead

The indirect factory-related costs that are incurred when a product is manufactured, including costs such as maintenance, utilities, and equipment depreciation.