The journal entry to record the collection of a Note Receivable at maturity value for a 120-day,
$36,000, 9 % note would include
A)debit to Interest Expense for $1,080.
B)credit to Notes Receivable for $37,080.
C)debit to cash for $36,000.
D)credit to Interest Income for $1,080.

Question

Quizplus · Accepted Answer

The correct entry includes crediting Interest Income for the interest earned on the note receivable. The interest is calculated as $36,000 * 9% * (120/360) = $1,080. Interest Expense is not correct because the company is earning, not paying, interest. The total collection would be the principal plus interest ($36,000 + $1,080 = $37,080), but the options given do not correctly represent debiting cash for the total amount or crediting Notes Receivable for the correct amount.

The Journal Entry to Record the Collection of a Note