A note receivable is issued in December, with interest due at maturity.When the note is paid the following February, the payee's entry includes (assuming a calendar-year accounting period when adjusting entries are recorded) a
A)credit to Interest Receivable.
B)credit to Cash.
C)debit to Notes Receivable.
D)debit to Interest Income.

Question

Quizplus · Accepted Answer

The payee would have recorded interest receivable at the end of December for the interest earned but not yet received. When the note is paid in February, the payee will credit Interest Receivable to remove it from the books, as the interest is now received in cash.

A Note Receivable Is Issued in December, with Interest Due