On April 12, Hong Company agrees to accept a 60-day, 10%, $5400 note from Indigo Company to extend the due date on an overdue accounts payable. What is the journal entry needed to record the transaction by Indigo Company?
A. Debit Accounts Receivable $5400; credit Notes Payable $5400.
B. Debit Accounts Payable $5400; credit Notes Payable $5400.
C. Debit Notes Payable $5400; credit Accounts Payable $5400.
D. Debit Sales $5400; credit Notes Payable $5400.
E. Debit Cash $5400; credit Notes Payable $5400.
Answer: B
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