On October 1, Bonnie's Online Sales sold goods for $20, 000 and accepted a six-month noninterest-bearing note.Current interest rates were 12%.The December 31 adjusting entry should be

Question

Quizplus · Accepted Answer

The correct answer is B because the interest for three months (October 1 to December 31) on a $20,000 note at an annual interest rate of 12% is $600 ($20,000 \times 0.12 \times \frac{3}{12}$). This amount represents the interest revenue earned by the end of the year, which is recognized by reducing the Discount on Notes Receivable and recording the Interest Revenue.

On October 1, Bonnie's Online Sales Sold Goods for $20 Interest Receivable 1,200 Interest Revenue 1,200\begin{array}{cr}\text { Interest Receivable } & 1,200 \\\text { Interest Revenue } & 1,200\end{array} Interest Receivable Interest Revenue ​1,2001,200​

On October 1, Bonnie's Online Sales Sold Goods for $20 $\begin{array}{cr}\text { Interest Receivable } & 1,200 \\\text { Interest Revenue } & 1,200\end{array}$