Clarion Corp.invested cash in a 6-month certificate of deposit (CD) on November 1, 2016.If Clarion Corp.has an accounting period that ends on December 31, 2016, when should Clarion recognize interest revenue from the CD?
A) On December 31, 2016 only
B) On May 1, 2017 only
C) Both December 31, 2016 and May 31, 2017
D) On the date when its income tax return is filed

Question

Quizplus · Accepted Answer

Interest revenue should be recognized as it is earned. Since the CD is a 6-month investment, interest is earned over time. Clarion should recognize interest revenue on December 31, 2016, for the interest earned up to that date, and again on May 1, 2017, when the CD matures.