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Lion Company accepted a $15,000, 30-day, 6% note on December 16 from Diaz Co, granting a time extension on his past-due account receivable. The adjusting entry on December 31 for Lion Company would include
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Lion Company accepted a $15,000, 30-day, 6% note on December 16 from Diaz Co, granting a time extension on his past-due account receivable. The adjusting entry on December 31 for Lion Company would include a credit to:

User Acme
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1 Answer

12 votes
12 votes

Answer:

Interest Revenue for $37.50

Step-by-step explanation:

The interest that has accrued on the note receivable from December 16 till December 31(for 15 days) needs to be recognized at the end of the year since the interest for those days has been earned.

Based on 30-day month counting, the interest that would be credited to interest revenue and debited to interest receivable on 31 December is computed thus:

interest receivable=$15000*6%*15/360

interest receivable=$37.50

User Rnn
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