Teller Purchased Merchandise from TechCom on October 17 of the Current

question 38

Multiple Choice

Teller purchased merchandise from TechCom on October 17 of the current year and TechCom accepted Teller's $4,800, 90-day, 10% note. If the note is dishonored, what entry should TechCom make on January 15 of the next year?

• A) Debit Notes Receivable $4,800; debit Interest Receivable $120; credit Sales $4,920.
• B) Debit Cash $4,920; credit Notes Receivable $4,920.
• C) Debit Cash $4,920; credit Interest Revenue $100; credit Interest Receivable $20, credit Notes Receivable $4,800.
• D) Debit Cash $4,920; credit Interest Revenue $20; credit Interest Receivable $100, credit Notes Receivable $4,800.
• E) Debit Accounts Receivable $4,920; credit Interest Revenue $20; credit Interest Receivable $100, credit Notes Receivable $4,800.

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Definitions:

Installment Note

A loan that requires regular payments, or installments, of principal and interest over a set period of time.

Issuing Company

A company that offers its securities for sale to the public or to private investors.

Indenture

A formal legal agreement, contract, or document, especially one outlining the terms of a bond or other financial debt instrument.

Debenture

A type of debt instrument that is not secured by physical assets or collateral.