The proper adjusting entry at December 31, 2009, with regard to this note receivable includes a:
A) Debit to Cash of $6,067.
B) Debit to Notes Receivable of $10,400.
C) Credit to Interest Revenue of $10,400.
D) Debit to Accrued Interest Receivable of $6,067.

Question

Quizplus · Accepted Answer

The adjusting entry for a note receivable at the end of the period includes recognizing the interest earned but not yet received. Therefore, the proper adjusting entry would be a debit to Accrued Interest Receivable (which represents the interest earned but not received) for $6,067. This entry would increase the receivable balance on the balance sheet and increase interest revenue on the income statement. None of the other options are correct as they do not reflect the recognition of earned interest.

The Proper Adjusting Entry at December 31, 2009, with Regard