Uniform Supply accepted a $4,800,90-day,10% note from Tracy Janitorial on October 17.What entry should Uniform Supply make on December 31,to record the accrued interest on the note?
A)Debit Cash $20;credit Notes Receivable $20.
B)Debit Cash $100;credit Notes Receivable $100.
C)Debit Interest Receivable $20;credit Interest Revenue $20.
D)Debit Interest Receivable $100;credit Interest Revenue $100.
E)Debit Cash $120;credit Interest Revenue $100;credit Interest Receivable $20.

Question

Quizplus · Accepted Answer

Accrued interest on a note is calculated using the following formula: principal x rate x time. In this case, the principal is $4,800, the rate is 10%, and the time is 75 days (from October 17 to December 31). Therefore, the accrued interest is $100 ($4,800 x 10% x 75/360). The entry to record this would be to debit Interest Receivable for $100 and credit Interest Revenue for $100.

Uniform Supply Accepted a $4,800,90-Day,10% Note from Tracy Janitorial on October