During January, Gaston Wholesalers Experienced Some Difficulties with Cash Flow

question 174

Multiple Choice

During January, Gaston Wholesalers experienced some difficulties with cash flow so it approached one of its vendors about a payment extension. The vendor agreed to the extension on the condition that the company sign a 30-day note that includes 9% interest. What journal entry is needed to record the retirement of the note on the maturity date?

• A)Debit notes payable and credit cash.
• B)Debit notes payable, credit interest expense, and credit cash.
• C)Debit notes payable, debit interest expense, and credit cash.
• D)Debit accounts payable, debit interest expense, and credit notes payable.

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Definitions:

Cash Over and Short

An accounting discrepancy representing a minor difference between the actual amount of cash on hand and the recorded amount.

Miscellaneous Expenses

Expenses that don't fit into any standard category of the business's budget, often small or irregular costs.

Invoice

A document issued by a seller to a buyer that itemizes a transaction and requests payment for goods or services provided.

Itemized Statement

A detailed document listing individual charges, items, or services along with their costs.