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20 February, 01:01

Sheffield Company lends Pharoah Company $10100 on April 1, accepting a four-month, 12% interest note. Sheffield Company prepares financial statements on April 30. What adjusting entry should be made before the financial statements can be prepared?

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  1. 20 February, 01:22
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    The answer is:

    Dr Interest receivable 303 Cr Interest revenue 303

    Explanation:

    The total interest Sheffield Company will charge during the four months is $1,212, equivalent to $303 per month. Since only one month has passed since the debt was made, Sheffield should record revenue for one month interest:

    Dr Interest receivable 303 Cr Interest revenue 303
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