If a note is issued for a $100,000 accounts receivable plus 5% penalty, what is the balance of Notes Receivable?

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Multiple Choice

If a note is issued for a $100,000 accounts receivable plus 5% penalty, what is the balance of Notes Receivable?

Explanation:
The balance of Notes Receivable is the principal plus the penalty added at issuance. Here, the note is issued for 100,000 plus a 5% penalty. 5% of 100,000 is 5,000, so the total becomes 105,000. That 105,000 is the Notes Receivable balance. Interest on the note would be recorded separately as it accrues over time.

The balance of Notes Receivable is the principal plus the penalty added at issuance. Here, the note is issued for 100,000 plus a 5% penalty. 5% of 100,000 is 5,000, so the total becomes 105,000. That 105,000 is the Notes Receivable balance. Interest on the note would be recorded separately as it accrues over time.

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