Benson Company calculates it has earned (but not yet collected or recorded) interest of $525 at December 31 on outstanding notes receivable.
How should Benson record this on December 31?
A) Interest Receivable 525
Interest Payable 525
B) Interest Receivable 525
Interest Income 525
C) Interest Payable 525
Interest Income 525
D) Interest Income 525
Interest Receivable 525
E) None of the above

Question

Quizplus · Accepted Answer

The correct way to record earned but not yet collected interest is to debit Interest Receivable for $525 and credit Interest Income for $525. This records the interest as an asset (receivable) and recognizes the income earned during the period.

Benson Company Calculates It Has Earned (But Not Yet Collected