When a note is accepted to settle an open account Notes Receivable is debited for the note's
A) net realizable value.
B) maturity value.
C) face value.
D) face value plus interest.

Question

Quizplus · Accepted Answer

When a note is accepted to settle an open account, it means that the debtor has promised to pay the full face value of the note at maturity. Therefore, Notes Receivable should be debited for the face value of the note. The net realizable value may be less than the face value if there is a risk of non-payment or if the note is sold at a discount, but this is not relevant when the note is accepted to settle an open account. Interest may be earned on the note, but it is not part of the initial entry.

When a Note Is Accepted to Settle an Open Account