Academy Grill Supply On October 1,2012,the company received a $50,000 promissory note from a customer.The annual interest rate is 6%.Principal and interest will be collected in cash at the maturity date of September 30,2013.
-Refer to Academy Grill Supply.If the company's year ends September 31,2013,an adjusting entry is needed to:

Question

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Since the company's year ends on September 31, 2013, and the customer is paying both principal and interest in cash on September 30, 2013, the interest revenue earned from October 1, 2012, to September 30, 2013, needs to be accrued. Therefore, an adjusting entry is needed to recognize the interest revenue earned but not yet received in cash, which is calculated as $50,000 x 6% = $3,000 for the entire year, but only for the period of October 1, 2012, to September 30, 2013, is ($3,000/12) x 12 = $750. This amount should be recorded as an increase in the interest receivable account since the interest revenue has been earned but not yet received in cash. Therefore, the correct choice is C, increase interest receivable by $750. The other options are incorrect because the notes receivable amount remains the same until it is collected in cash, and the total interest revenue earned is $3,000, but only $750 is accrued for the current year.

Academy Grill Supply on October 1,2012,the Company Received a $50,000