On November 1,2018,Lendem,Inc.loaned an employee $100,000 at 6% with both the interest and principal due in one year.No adjusting entries have been recorded in connection with this note.The adjusting entry to record the interest earned but not received as of December 31,2018 includes a:

Question

Quizplus · Accepted Answer

Interest = Principal × Interest rate × Time
= $100,000 × 0.06 × 2/12 (for November and December)= $1,000
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 $1,000.