On January 1,a company lends a customer $90,000 for one year at a 7% annual interest rate.The note requires the payment of interest twice each year on June 30 and December 31.An adjusting entry to accrue interest is recorded at the end of every month.On July 2,a check for the interest payment for January through June comes in the mail.What journal entry will the company record on July 2?

Question

Quizplus · Accepted Answer

Interest = Principal × Interest rate × Time
= $90,000 × 0.07 × 6/12 (January through June)= $3,150
Adjusting entries have been recorded at the end of each month to accrue the interest earned.Accordingly,at June 30,the Interest Receivable and Interest Revenue accounts include six months (January through June)of accrued interest.As a result,the entry to record the receipt of the semi-annual interest payment includes a debit to Cash and a credit to Interest Receivable for $3,150.

On January 1,a Company Lends a Customer $90,000 for One