On November 19, Nicholson Company receives a $15,000, 60-day, 8% note from a customer as payment on a past-due account. What adjusting entry should be made on the December 31 year-end?

Question

Quizplus · Accepted Answer

Since the note was for 60 days and was received on November 19, the maturity date would be January 18 of the following year (60 days later). Therefore, on December 31 (43 days after receiving the note), there would be accrued interest for 43/365 of a year (using a 365-day year).

The calculation would be: 
$15,000 x 0.08 x 43/365 = $140.11 (rounded to $140)

Therefore, the adjusting entry on December 31 would be:
Debit Interest Receivable $140; credit Interest Revenue $140.

On November 19, Nicholson Company Receives a $15,000, 60-Day, 8