XYZ invested $1 million with a bank for 1 year on 1 May 2016 at 9 per cent (interest payable at end of loan).What is the debit side of the adjusting entry at 30 June 2016?

Question

Quizplus · Accepted Answer

At 30 June 2016, XYZ would have earned 2 months of interest, which is $15,000 (9% of $1 million for 2 months). Since interest is payable at the end of the loan, XYZ has not yet received this revenue and thus needs to recognize it as an accrued revenue receivable on the debit side of the adjusting entry. Therefore, choice A is the best option.

XYZ Invested $1 Million with a Bank for 1 Year