Your Company Converted an Existing Account Receivable in the Amount

question 32

Multiple Choice

Your company converted an existing account receivable in the amount of $5,000 to a note receivable to allow an extended payment period.The note is due in one year and includes an annual interest rate of 5%.The customer repays the principal at the maturity date.The entry to record the receipt of the principal includes a debit to:

• A)Cash and credit to Notes Receivable.
• B)Notes Receivable and credit to Accounts Receivable.
• C)Cash and credit to Interest Receivable.
• D)Notes Receivable and credit to Cash.

Understand accounting for merchandise transactions using the gross and net methods.

Calculate gross profit, net income, and understand their implications on financial performance.

Apply knowledge of periodic and perpetual inventory systems in accounting entries.

Understand and calculate discounts, including sales discounts and purchase discounts.

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Definitions:

GAAP

Short for Generally Accepted Accounting Principles, a set of rules and standards designed to ensure consistency in financial reporting.

IFRS

International Financial Reporting Standards – a set of accounting standards developed by the International Accounting Standards Board (IASB) guiding the financial reporting of companies.

GAAP

Generally Accepted Accounting Principles, a set of rules and standards used for financial reporting and accounting in the U.S. to ensure consistency and transparency.

IFRS

International Financial Reporting Standards, a set of accounting principles that dictate how transactions and other accounting events are reported in financial statements globally.