Question

Suppose a customer is unable to pay its account on time, so the company accepts a six-month interest-bearing note receivable to replace the customer's account receivable. What effect will accepting the note receivable have on the company's financial statements at the time of acceptance?

A) Total assets decrease.

B) No change in total assets.

C) Total revenues increase.

D) Total assets increase.

Answer 1

Answer:

B) No change in total assets.

Explanation:

Since it is given that the company accepts a six-month note receivable so that it replaces the account receivable of the customer. Due to which there is an increase in note receivable and a decrease in account receivable.  

Since the increase and the decrease is taking place in the assets that reflects there is no change in overall total assets