Question

On August 1, Kim Company accepted a 90-day note receivable as payment for services provided to Hsu Company. The terms of the note were $14,000 face value and 6% interest. On October 30, the journal entry to record the collection of the note, assuming a 360-day year, should include a

Answer 1

Credit to interest revenue $210

Step-by-step explanation:

The journal entry is shown below:

Interest receivable A/c Dr $210

To Interest revenue A/c $210

(Being accrued interest is recorded)

The computation of accrued interest is shown below:

= Note receivable amount × rate of interest × number of months ÷ (total number of months in a year)

= $14,000× 6% × (3 months ÷ 12 months)

= $210

The 3 months is calculated from August 1 to October 30