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 $12,000 face value and 7% interest. On October 30, the journal entry to record the collection of the note should include a

Answer 1

Given that,

Note face value = $12,000

Interest rate = 7%

Time period = 90 days

Interest amount:

= Face value × Interest rate × Time period

= $12,000 × 0.07 × (90/360)

= $210

Therefore, the journal entry is as follows:

On October 30,

Interest receivables A/c Dr. $210

To Interest revenue $210

(To record the interest value on note)