On March 14, Teal Co. accepted a 120-day, 6% note in the amount of $10,000 from AZC Co., a customer. On the due date of the note, AZC honors the note and pays in full. The journal entry that Teal would make to record payment of this note would include a credit to:

a. Note Receivable for $10,200.

b. Interest Revenue for $200.

c. Cash for $10,000.

d. Interest Receivable for $200.

Question

Business

Jackson Reeves

6 July, 15:43

On March 14, Teal Co. accepted a 120-day, 6% note in the amount of $10,000 from AZC Co., a customer. On the due date of the note, AZC honors the note and pays in full. The journal entry that Teal would make to record payment of this note would include a credit to:

a. Note Receivable for $10,200.

b. Interest Revenue for $200.

c. Cash for $10,000.

d. Interest Receivable for $200.

+3

Answers (1)

Know the Answer?

Dominic Gallegos · Answer 1

a. Note Receivable for $10,200

Explanation:

When Teal Co. granted the note the following record was made in their books:

Note Receivable $10,000 (debit)

Revenue $10,000 (credit)

When the Interest Income incurs on the note at 6%, the following entry is made

Note Receivable $200 (debit)

Interest Income $200 (credit)

Finally when the customer Honors the Note

Cash $10,200 (debit)

Note Receivable $10,200 (credit)