Question

On May 18, Rodriguez Co. issued an $84,000, 6%, 120-day note payable on an overdue account payable to Wilson Company. Assume that the fiscal year of Rodriguez ends on June 30. Which of the following relationships is true?a. Rodriguez is the creditor and credits Accounts Receivable
b. Wilson is the creditor and debits Accounts Receivable
c. Rodriguez is the borrower and debits Accounts Payable
d. Wilson is the borrower and credits Accounts Payable

Answer 1

Answer:

c. Rodriguez is the borrower and debits Accounts Payable

Explanation:

Rodriguez Co will :

1. De-recognise the Trade Payable - Wilson Company
2. Recognise a Financial Liability to Wilson Company

Wilson Company will :

1. Recognise an Investment or FA in Rodriguez Co
2. De-recognise the Trade Receivable - Wilson Company