On June 1, 2009, Jensen Company acquired an 8%, ten-month note receivable from a customer in settlement of an existing account receivable of $130,000. Interest and principal are due at maturity.
-Refer to the above data. The proper adjusting entry at December 31, 2009, with regard to this note receivable includes a:

Question

Quizplus · Accepted Answer

To properly adjust for the interest on the note that has been earned but not yet received, a debit must be made to Accrued Interest Receivable for the amount of interest earned but not yet received ($6,067). Therefore, choice D is the correct answer.

Option A is incorrect because there is no need to debit Cash for any amount in this adjusting entry.

Option B is incorrect because there is no need to debit Notes Receivable for any amount in this adjusting entry.

Option C is incorrect because there is no need to credit Interest Revenue for the full amount of the note ($10,400). Only the portion of interest earned but not yet received should be credited to Interest Revenue through the adjusting entry.

On June 1, 2009, Jensen Company Acquired an 8%, Ten-Month