A note receivable is executed in December. When the note is paid the following February, the payee's entry includes (assuming a calendar-year accounting period and no reversing entries) a
A) credit to Interest Receivable.
B) credit to Cash.
C) debit to Notes Receivable.
D) debit to Interest Income.

Question

Quizplus · Accepted Answer

Interest that has accrued by the end of December would have been recorded as Interest Receivable. When the note is paid in February, the entry would include a credit to Interest Receivable to remove it from the books.

A Note Receivable Is Executed in December