Question

Specialty Inc. converts an existing account receivable to a note receivable to allow an extended payment period. Specialty receives a $2,000, 3-month, 12% promissory note from its customer. What entry will Specialty make upon receipt of the note?

A) Debit Notes Receivable and credit Accounts Receivable for $2,060

B) Debit Accounts Receivable and credit Notes Receivable for $2,000

C) Debit Notes Receivable for $2,000, debit Interest Receivable for $60, credit Accounts Receivable for $2,000, and credit Interest Revenue for $60

D) Debit Notes Receivable and credit Accounts Receivable for $2,000

Answer

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