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

question 43

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 needed to record the transaction by Indigo Company?

• A) Debit Notes Payable $4,500; credit Accounts Payable $4,500.
• B) Debit Sales $4,500; credit Notes Payable $4,500.
• C) Debit Accounts Payable $4,500; credit Notes Payable $4,500.
• D) Debit Cash $4,500; credit Notes Payable $4,500.
• E) Debit Accounts Receivable $4,500; credit Notes Payable $4,500.

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Definitions:

Standard Quantity

The expected or predetermined amount of materials or input required to produce a single unit of product.

Standard Price

A predetermined cost assigned to materials, labor, and overhead, used as a benchmark against which the actual costs are compared.

Standard Hours

The predetermined amount of time expected to complete a task or to produce a unit of output under normal conditions.