Harper company lends hewell company $40,000 on march 1, accepting a four-month, 6% interest note. harper company prepares financial statements on march 31. what adjusting entry should be made before the financial statements can be prepared?

Question

Bradyn Daniels

Business

9 June, 01:44

Harper company lends hewell company $40,000 on march 1, accepting a four-month, 6% interest note. harper company prepares financial statements on march 31. what adjusting entry should be made before the financial statements can be prepared?

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Answers (1)

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Shaun Woodward · Answer 1

Given:

march 1: loaned 40,000 to Hewell Company

loan term, 4 months, 6% interest on note.

On March 31, Harper Company should recognize the interest it will earn from the note of Hewell Company.

40,000 x 6% = 2,400 this is the annual interest

2,400 * 1/12 = 200 monthly interest

March 31

Debit Credit

Interest receivable 200

Interest Revenue 200