Paper Company receives a $6,000, 3-month, 6% promissory note from Dame Company in settlement of an open accounts receivable. What entry will Paper Company make upon receiving the note? A. Notes Receivable 6,000Accounts Receivable-Dame Company 6000 B. Notes Receivable 6,090Accounts Receivable-Dame Company 6090 C. Notes Receivable 6,090Accounts Receivable-Dame Company 6000 Interest Revenue 90 D. Notes Receivable 6,000Interest Revenue 90Accounts Receivable-Dame Company 6000Interest Receivable 90

Question

Business

Jefferson Neal

28 April, 08:05

Paper Company receives a $6,000, 3-month, 6% promissory note from Dame Company in settlement of an open accounts receivable. What entry will Paper Company make upon receiving the note? A. Notes Receivable 6,000Accounts Receivable-Dame Company 6000 B. Notes Receivable 6,090Accounts Receivable-Dame Company 6090 C. Notes Receivable 6,090Accounts Receivable-Dame Company 6000 Interest Revenue 90 D. Notes Receivable 6,000Interest Revenue 90Accounts Receivable-Dame Company 6000Interest Receivable 90

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Esmeralda Brennan · Answer 1

A. Notes Receivable 6,000 A/c Dr

To Accounts Receivable-Dame Company 6000

Explanation:

Since we have to pass the journal entry of receiving the promissory note, so the journal entry would be:

Notes Receivable 6,000 A/c Dr

To Accounts Receivable-Dame Company 6000

(Being note is received in exchange of accounts receivable)

The notes receivable is an asset so it would be debited whereas account receivable is also an asset but we have to give extra time to the debtor to pay, so for that, we credited the accounts receivable account.