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 payment of the note by Indigo Company on the maturity date?
A)Debit Notes Payable $4,500;debit Interest Expense $75;credit Cash $4,575.
B)Debit Notes Payable $4,500;credit Interest Expense $75,credit Cash $4,425.
C)Debit Cash $4,575;credit Interest Revenue $75;credit Notes Payable $4,500.
D)Debit Notes Payable $4,500;debit Interest Expense $112;credit Cash $4,612.
E)Debit Cash $4,575;credit Interest Revenue $75;credit Notes Receivable $4,500.

Question

Quizplus · Accepted Answer

The journal entry to record the payment of the note by Indigo Company on the maturity date includes debiting Notes Payable for the principal amount of $4,500, debiting Interest Expense for the interest amount of $75 (calculated as $4,500 * 10% * 60/360), and crediting Cash for the total amount of $4,575.

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