On August 15, 2005, Benet Co. sold goods for which it received a note bearing the market rate of

interest on that date. The four-month note was dated July 15, 2005.

Note that the principal, together with all interest, is due November 15, 2005.

When the note was recorded on August 15, which of the following accounts increased?

A. Unearned discount.

B. Interest receivable.

C. Prepaid interest.

D. Interest revenue.

Question

Gabriela Walker

Business

28 October, 00:42

On August 15, 2005, Benet Co. sold goods for which it received a note bearing the market rate of

interest on that date. The four-month note was dated July 15, 2005.

Note that the principal, together with all interest, is due November 15, 2005.

When the note was recorded on August 15, which of the following accounts increased?

A. Unearned discount.

B. Interest receivable.

C. Prepaid interest.

D. Interest revenue.

+4

Answers (1)

Know the Answer?

Houston Wilkinson · Answer 1

B) Interest receivable.

Explanation:

Since the note was received one month into its term (July 15 ⇒ August 15), it must be recorded with interest receivable for one month.

This means that Benet will record as interest revenue only three months of interest (August 15 ⇒ September 15 ⇒ October 15 ⇒ November 15), instead of four.