Question

On august 9, pierce company receives a $8,500, 90-day, 8% note from customer eric simms as payment on his account. what entry should be made on the maturity date assuming the maker pays in full? group of answer choices

O debit notes receivable $8,500; debit interest receivable $170; credit sales $8,670.
O debit cash $8,670; credit interest revenue $170; credit notes receivable $8,500.
O debit cash $8,628; credit interest revenue $128; credit notes receivable $8,500.
O debit cash $8,613; credit interest revenue $113; credit notes receivable $8,500.
O debit cash $8 500; credit notes receivable $8,500.

Answer 1

On the maturity date, the Pierce Company should debit cash for $8,670 and credit notes receivable for $8,500 and interest revenue for $170, reflecting full payment of the principal and accumulated interest.

Step-by-step explanation:

The correct entry on the maturity date, assuming the maker pays in full for the $8,500, 90-day, 8% note from customer Eric Simms received by Pierce Company, is to debit cash for the principal plus the interest earned and to credit notes receivable and interest revenue. To calculate the interest: Interest = Principal × Interest Rate × Time = $8,500 × 8% × (90/365). This would give us an interest amount of approximately $170 (rounded to the nearest dollar). Therefore, the correct entry is:

• Debit Cash $8,670 (=$8,500 principal + $170 interest)
• Credit Notes Receivable $8,500
• Credit Interest Revenue $170