If a 15%,two-Month Note Receivable Is Acquired from a Customer

question 145

Multiple Choice

If a 15%,two-month 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:

Stock Option Plan

A compensation strategy used by companies to grant employees the option to purchase company shares at a predetermined price.

Compensation Expense

The total cost incurred by an employer to compensate its employees, including wages, benefits, bonuses, and any other form of payment for services rendered.

Fair Value

An estimate of the market value of an asset or liability, based on current conditions and mutually knowledgeable, willing parties' transactions.

Total Compensation Cost

It encompasses the complete value of all compensatory payments and benefits provided to employees, including salaries, bonuses, and benefits.