Rabbit Company closes its accounts on December 31 each year. On December 31, 2016, Rabbit Company accrued interest income totaling $640 that was earned on a $40,000 investment but not yet received or recorded (the investment will pay interest of $1,100 cash on January 31, 2017). On January 31, 2017, the company received the $1,100 cash as interest on the investment.
Prepare journal entries to:
A. Accrue the interest earned on December 31, 2016.
B. Close the Interest Income account on December 31, 2016 (the account has a year-end balance of $2,600 after adjustments).
C. Record the cash receipt of interest on January 31, 2017.

Question

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The Answer of Rabbit Company closes its accounts on December 31 each year. On December 31, 2016, Rabbit Company accrued interest income totaling $640 that was earned on a $40,000 investment but not yet received or recorded (the investment will pay interest of $1,100 cash on January 31, 2017). On January 31, 2017, the company received the $1,100 cash as interest on the investment.
Prepare journal entries to:
A. Accrue the interest earned on December 31, 2016.
B. Close the Interest Income account on December 31, 2016 (the account has a year-end balance of $2,600 after adjustments).
C. Record the cash receipt of interest on January 31, 2017.

Rabbit Company Closes Its Accounts on December 31 Each Year