Question

On July 9, Mifflin Company receives a $8,100, 90-day, 8% note from customer Payton Summers as payment on account. What entry should be made on the maturity date assuming the maker pays in full? (Use 360 days a year.)

a. Debit Cash $8,100; credit Notes Receivable $8,100.
b. Debit Cash $8,262; credit Interest Revenue $162; credit Notes Receivable $8,100.
c. Debit Cash $8,222; credit Interest Revenue $122; credit Notes Receivable $8,100.
d. Debit Cash $8,208; credit Interest Revenue $108; credit Notes Receivable $8,100.
e. Debit Notes Receivable $8,100; debit Interest Receivable $162; credit Sales $8,262.

Answer 1

Answer:

B. Debit Cash $8,262; credit Interest Revenue $162; credit Notes Receivable $8,100.

Explanation:

The journal entry to record the payment at the maturity date is as follows:

Cash                      Debit     $8,262

Interest revenue   Credit    $162

Notes receivable   Credit   $8,100

Calculation: Interest revenue = $8,100 × 8% = (648 ÷ 360) × 90 = $162

Therefore, cash = Interest revenue + Notes receivable = $162 + $8,100 = $8,262.

Therefore, option B is correct.