Question

On November 19, Nicholson Company receives a $18,600, 60-day, 10% note from a customer as payment on account. What adjusting entry should be made on the December 31 year-end

Answer 1

Answer and Explanation:

The adjusting entry is as follows

Interest receivable Dr ($18,600 × 10% × 42 days ÷ 360 days) $217

To Interest revenue $217

(being the interest revenue is recorded)

Here the interest receivable is debited as it increased the assets and credited the interest revenue as it also increased the revenue

The 42 days are calculated from Nov 19 to Dec 31