On April 12,Hong Company agrees to accept a 60-day,10%,$4,500 note from Indigo Company to extend the due date on an overdue account.What is the journal entry needed to record the transaction by Indigo Company?
A)Debit Notes Payable $4,500;credit Accounts Payable $4,500.
B)Debit Accounts Payable $4,500;credit Notes Payable $4,500.
C)Debit Accounts Receivable $4,500;credit Notes Payable $4,500.
D)Debit Cash $4,500;credit Notes Payable $4,500.
E)Debit Sales $4,500;credit Notes Payable $4,500.

Question

Quizplus · Accepted Answer

Indigo Company is converting an overdue account payable into a note payable, so they debit Accounts Payable to remove the liability and credit Notes Payable to recognize the new obligation.

On April 12,Hong Company Agrees to Accept a 60-Day,10%,$4,500 Note