ABC Corp.received a 3-month,at 8% per year,$1,500 note receivable on November 1.The adjusting entry on December 31 will include a:
A)debit to Interest Revenue of $20.
B)credit to Interest Receivable of $10.
C)credit to Interest Revenue of $120.
D)credit to Interest Revenue of $20.

Question

Quizplus · Accepted Answer

Interest = Principal × Interest rate × Time
= $1,500 × 0.08 × 2/12 (for November and December)= $20
An adjusting entry must be recorded at the end of the accounting period to accrue the interest earned includes a debit to Interest Receivable (to increase that asset account).and a credit to Interest Revenue (to increase that revenue account)for $20.

ABC CorpReceived a 3-Month,at 8% Per Year,$1,500 Note Receivable on November