A Promissory Note Is Executed in June

question 102

Multiple Choice

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

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

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Definitions:

Zero-coupon Bonds

Bonds that are issued at a discount to their face value and do not pay interest during their life but are redeemed at full face value at maturity.

Coupon Rate

Yearly rate of interest on a bond, indicated as a percentage of its face value.

Maturity Bond

A fixed-income security that repays the principal along with interest at the end of a specified period.

Forward Interest Rate

A future rate agreed upon for a financial transaction or investment that will be carried out at a later date.