Saturday, December 20, 2008

Adjusting Journal Entry Note Receivable

If a company receives a 90-day, 6 percent note receivable from a client for the sale of a $10,000 computer. The sale occurred in the middle of September. If IBN’s accounting period ends on September 31, and they fail to make the appropriate adjusting entry related to the note receivable, then

A. Assets will be overstated and equity will be overstated.
B. Assets will be understated and equity will be unaffected.
C. Assets will be overstated and liabilities will be understated.
D. Assets will be understated and equity will be understated.

Answer D

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