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 $20,000 face value and 6% interest. On October 30, the journal entry to record the collection of the note should include a A. credit to Notes Receivable for $20,300B. debit to Interest Receivable for $300C. credit to Interest Revenue for $300D. debit to Notes Receivable for $20,000

Question

Christine Yu

Business

24 February, 15:31

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 $20,000 face value and 6% interest. On October 30, the journal entry to record the collection of the note should include a A. credit to Notes Receivable for $20,300B. debit to Interest Receivable for $300C. credit to Interest Revenue for $300D. debit to Notes Receivable for $20,000

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Jaylee Chang · Answer 1

Answer: C. Credit to Interest Revenue for $300

Explanation: As of October 30, the company has generated interest for:

Interest = $ 20,000 x 6% per year

Interest = $ 1,200 / 12 months

Interest = $ 100 per month

Interest = $ 100 x 3 months

Interest = $ 300

These interests are an interest gain from an account receivable, it is credited in the interest income corresponding to the income statement.