Uniform Supply accepted a $4,800,90-day,10% note from Tracy Janitorial on October 17.What entry should Uniform Supply make on January 15 of the next year when the note is paid? (Assume reversing entries are not made.)(Use 360 days a 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 Cash $4,920; credit Interest Revenue $120; credit Notes Receivable $4,800.

Question

Quizplus · Accepted Answer

Uniform Supply should debit Cash for the full amount of the note plus the interest earned, which is calculated using the formula: Interest = Principal × Rate × Time. Therefore, Interest = $4,800 × 0.10 × (90/360) = $120. The interest revenue should be credited for $20 (which was already recorded as Interest Receivable) and the Notes Receivable account should be credited for the principal amount of $4,800.

Uniform Supply Accepted a $4,800,90-Day,10% Note from Tracy Janitorial on October