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dsp73
3 years ago
10

On January 1, Franz Co. accepted a 30-day, 6% note in the amount of $5,000 from Bria Co., a customer. On January 31, the due dat

e of the note, Bria honors the note and pays in full. The journal entry that Franz would make to record payment of this note would include a:
A) debit to Cash for $5,025.
B) credit to Note Receivable for $5,000.
C) credit to Interest Revenue for $25.
Business
1 answer:
Blababa [14]3 years ago
4 0

Answer:

The answer is:

Dr Cash $5,025

Cr: Receivable $5,000

Cr: Interest Revenue $25

Explanation:

The year is 360 days.

Annual rate is 6%

Therefore, interest rare for the 30-day is 1.5%[(90/360) x 6%]

So, the interest on the rate is:

0.5% x $5,000

$25.

The total amount collected from Bria will be principal + interest

$5,000 + $25 = $5,025

According to the accounting rule, debit increases asset and expenses and vice-versa while credit decreases liability, equity, income and vice versa.

So we have:

Dr Cash $5,025

Cr: Receivable $5,000

Cr: Interest Revenue $25

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