On November 16, Bell borrowed $10,000 from Graham and gave a 90-day, 12% note. On December 31, the end of the accounting period, Graham would record:

Question

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The interest for the period up to December 31 needs to be recognized. The interest for 45 days (from November 16 to December 31) on a $10,000 loan at 12% annual interest is calculated as follows: $10,000 * 12% * (45/365) = $147.95, rounded to $150. This amount represents the interest income earned by Graham but not yet received, thus it increases Interest Receivable.

On November 16, Bell Borrowed $10,000 from Graham and Gave