If a 5%, 120-Day Note Receivable Is Acquired from a Customer

question 58

Multiple Choice

If a 5%, 120-day note receivable is acquired from a customer in settlement of an existing account receivable of $50,000, the accounting entry for acquisition of the note will:

• A) Include a debit to Notes Receivable for $50,822.
• B) Include a debit to Notes Receivable for $50,208.
• C) Include a credit to Interest Revenue for $822.
• D) Include a debit to Notes Receivable for $50,000 and no entry for interest.

Recognize different methods of managing accounts receivable and their impacts on a firm’s finances.

Understand the concepts and types of demand for holding cash, including transactions, precautionary, and speculative demands.

Identify the types of collateral used in secured loan agreements and their purposes.

Comprehend the reasons for and mechanisms behind the provision of trade credit by firms.

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Definitions:

Indications

Symptoms or conditions that suggest the need for a specific treatment, medication, or procedure.

Controlled Substances

Substances or compounds whose production, ownership, and consumption are controlled by legislation because of their risk for dependency or misuse.

Synthetic Drug

Artificially manufactured drugs designed to mimic the effects of natural drugs, often having enhanced potency or different effects.