On November 1, Jasper Company loaned another company $100,000 at a 6.0% interest rate. The note receivable plus interest will not be collected until March 1 of the following year. The company's annual accounting period ends on December 31, and adjustments are only made at year-end. The adjusting entry needed on December 31 is:

Question

Emely Proctor

Business

17 May, 19:04

On November 1, Jasper Company loaned another company $100,000 at a 6.0% interest rate. The note receivable plus interest will not be collected until March 1 of the following year. The company's annual accounting period ends on December 31, and adjustments are only made at year-end. The adjusting entry needed on December 31 is:

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Knox · Answer 1

The journal entry is shown below:

Interest receivable A/c Dr $1,000

To Interest revenue A/c $1,000

(Being accrued interest is recorded)

The computation of accrued interest is presented below:

= Principal * rate of interest * number of months : (total number of months in a year)

= $100,000 * 6% * (2 months : 12 months)

= $1,000

The 2 months is calculated from November 1 to December 31