If a 15%, 60-Day Note Receivable Is Acquired from a Customer

question 30

Multiple Choice

If a 15%, 60-day note receivable is acquired from a customer in settlement of an existing account receivable of $5,000, the accounting entry for acquisition of the note will:

• A) Include a debit to Notes Receivable for $5,750.
• B) Include a debit to Notes Receivable for $5,062.50.
• C) Include a credit to Interest Revenue for $62.50.
• D) Include a debit to Notes Receivable for $5,000 and no entry for interest.

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Definitions:

Multiple-Step Income Statement

A detailed financial statement that separates operating revenues and expenses from non-operating ones, providing a thorough insight into company performance.

Perpetual Inventory System

An inventory management method where updates are made continuously to record every sale and purchase, providing a real-time view of inventory levels.

Inventory

The total amount of goods and materials held by a company for the purpose of resale, production, or use in service delivery.

FOB Shipping Point

A term in shipping contracts indicating that the buyer assumes responsibility for loss or damage once the goods are shipped.