A Company Accepts a 90-Day, 9 Percent, $1,200 Note from One

question 12

Multiple Choice

A company accepts a 90-day, 9 percent, $1,200 note from one of its customers on June 15 in settlement of its account. Which of the following journal entries records the payment at maturity in the customer's general journal form? Assume a 360-day year.

• A) Debit Accounts Payable by $1,227; credit Cash by $1,227
• B) Debit Notes Payable by $1,200, debit Interest Expense by $27; credit Cash by $1,227
• C) Debit Notes Payable by $1,227; credit Cash by $1,227
• D) Debit Accounts Payable by $1,227, credit Cash by $1,200; credit Interest Expense by $27

---

Definitions:

Social Optimum

A state in which resources are allocated in the most efficient way from the perspective of society as a whole.

Economic Efficiency

A state where all resources in an economy are optimally allocated to serve each individual or entity in the best way while minimizing waste and inefficiency.

Transaction Cost

Expenses incurred when buying or selling goods or services, including fees, taxes, and other charges.

Externality Problem

A situation in which a third party is affected by the consequences of a transaction or activity between others, either positively or negatively.