Question

Jasper makes a $25,000, 90-day, 7 % cash loan to Clayborn Co. Jasper's entry to record the collection of the note and interest at maturity should be: (Use 360 days a year.)
A) Debit Cash for $25,000; credit Notes Receivable $25,000.
B) Debit Cash $25,437.50, credit Interest Revenue $437.50; credit Notes Receivable $25,000.
C) Debit Cash $25,437.50; credit Notes Receivable for $25,437.50.
D) Debit Notes Payable $25,000; Debit Interest Expense $1,750; credit Cash $26,750.
E) Debit Cash $26,750; credit Interest Revenue $1,750, credit Notes Receivable $25,000.

Answer 1

Answer:

B) Debit Cash $25,437.50; credit Interest Revenue $437.50; credit Notes Receivable $25,000.

Explanation:

Based on the information given Jasper's appropriate journal entry to record the collection of the note and interest at maturity should be:

Debit Cash $25,437.50

($25,000+$437.50)

Credit Interest Revenue $437.50

(7%*25,000*90 days/360 days a year =$437.50)

Credit Notes Receivable $25,000

(Being to record the collection of the note and interest at maturity)