Question

Young Company lends Dobson industries $40000 on August 1, 2022, accepting a 5-month, 9% interest note. If Young Company prepares its financial statements as of December 31, 2022, what adjusting entry must it make

Answer 1

INTEREST RECEIVABLE - - - - - - - - - 1500

INTEREST REVENUE - - - - - - - - - - - 1500

Step-by-step explanation:

Lent amount = $40,000

Interest rate = 9%

Duration = August 1 - December 31st = 5 months

Lent amount × interest rate × duration

$40,000 × 0.09 × (5/12)

= $1500

Adjustment :

INTEREST RECEIVABLE - - - - - - - - - 1500

INTEREST REVENUE - - - - - - - - - - - 1500