Wagner's Bookstore acquires a 6%,$12,000 certificate of deposit on September 1.The term of the CD is six months.At that time,all principal and accrued interest will be paid in cash.Indicate the effect on the financial statements at December 31.
A)Interest Receivable increases $240,Interest Revenue increases $240
B)Interest Receivable increases $360,Interest Revenue increases $360
C)Interest Receivable increases $480,Interest Revenue increases $480
D)Interest Receivable increases $720,Interest Revenue increases $720

Question

Quizplus · Accepted Answer

The interest for 4 months (September to December) is calculated as follows: $12,000 * 6% * (4/12) = $240. This means Interest Receivable and Interest Revenue both increase by $240.

Wagner's Bookstore Acquires a 6%,$12,000 Certificate of Deposit on September