Harper Company lends Hewell Company $40,000 on March 1, accepting a four-month, 6% interest note. Harper Company prepares financial statements on March 31. What adjusting entry should be made before the financial statements can be prepared?

Question

Quizplus · Accepted Answer

The interest for one month (March) needs to be accrued. The interest for one month is calculated as $40,000 * 6% * (1/12) = $200. Therefore, the adjusting entry is to debit Interest Receivable and credit Interest Revenue for $200.

Harper Company Lends Hewell Company $40,000 on March 1, Accepting