On December 31,2015,Infinity Inc.records an adjusting entry to accrue interest on a note.On January 31,2016,Infinity receives a check for $4,680,which represents two months of accumulated interest on the note.Upon receipt of this interest payment,Infinity should debit:

Question

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In December, an entry was made to accrue interest on the note, which means that Interest Receivable was debited and Interest Revenue was credited. On January 31st, when Infinity Inc. received the interest payment, the entry should be to debit Cash (as cash is received), credit Interest Receivable (to reduce the accrued interest account), and credit Interest Revenue (to recognize the earned revenue).

Option A is incorrect because it debits Interest Receivable when it should be credited to reduce the account after receiving payment.

Option B is the correct answer because it appropriately credits Interest Receivable for the accrued interest amount and recognizes the interest revenue earned on the note.

Option C is incorrect because it only credits Interest Receivable and does not recognize the interest revenue earned.

Option D is incorrect because it only recognizes the interest revenue earned and does not account for the reduction in the Interest Receivable account.