Final answer:
On April 1, 2015, the journal entry for the interest payment received by the company should debit Cash for $5,600 and credit Interest Receivable for $4,200 and Interest Revenue for $1,400. This reflects the cash received and accurately records the interest income for the period.
Step-by-step explanation:
Journal Entry for Interest Payment Received
When the company receives the annual interest payment on April 1, 2015, the journal entry will include a debit to Cash and a credit to Interest Receivable for the previously accrued interest amount of $4,200. Additionally, there will be a credit to Interest Revenue for the interest that has accumulated from January 1, 2015, to April 1, 2015, which was not previously accrued.
The amount for this additional interest revenue is $1,400, which represents three months of interest on the $70,000 note at 8%. The total interest for the year would be $5,600 ($70,000 x 8%), and you have already recognized $4,200 of that in the previous year's adjusting entry.
Here is the entry that should be made:
- Debit Cash $5,600 (full interest for the current year)
- Credit Interest Receivable $4,200 (to remove the amount previously accrued)
- Credit Interest Revenue $1,400 (to recognize the additional interest revenue not yet accrued)
It is important to ensure that the entries accurately reflect the actual cash received and the correct amount of interest revenue for the financial period.