Reference no: EM132495150

Question 1: In payment of an open account, Kit-Kat Corporation issued a $5,000, 4%, 3-month note to Ruth Ltd. on July 1. Interest is due at maturity. On Oct 1, Kit-Kat sent notification to Ruth that Kit-Kat is unable to honour the note at this time and will pay at a later date. The fiscal year end for both companies is December 31. The journal entry recorded by Kit-Kat Corporation on Oct 1 should include:

Option 1: Notes Payable

5,000

Interest Payable

200

Accounts Payable

5,200

Option 2: Notes Payable

5,000

Interest Payable

50

Accounts Payable

5,050

Option 3: Accounts Payable

5,000

Notes Payable

5,000

Option 4: Notes Payable

5,000

Accounts Payable

5,000

Option 5: None of the above