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

question 144

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 that Indigo Company would make, when it records payment of the note on the maturity date? (Use 360 days a year.)

• A) Debit Cash $4,575; credit Interest Revenue $75; credit Notes Payable $4,500.
• B) Debit Notes Payable $4,500; credit Interest Expense $75, credit Cash $4,425.
• C) Debit Notes Payable $4,500; debit Interest Expense $75; credit Cash $4,575.
• D) Debit Cash $4,575; credit Interest Revenue $75; credit Notes Receivable $4,500.
• E) Debit Notes Payable $4,500; debit Interest Expense $112; credit Cash $4,612.

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