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 $8,500 face value and 7% interest. On October 30, the journal entry to record the collection of the note should include a.

A) Credit to Interest Revenue for $149

B) Interest Revenue for $349

C) Notes Receivable for $249

D) Interest Receivable for $49

Question

Abril Fritz

Business

8 May, 04:43

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 $8,500 face value and 7% interest. On October 30, the journal entry to record the collection of the note should include a.

A) Credit to Interest Revenue for $149

B) Interest Revenue for $349

C) Notes Receivable for $249

D) Interest Receivable for $49

+2

Answers (1)

Know the Answer?

Braxton Gill · Answer 1

Answer: The correct answer is " A) Credit to Interest Revenue for $149 "

Explanation: The interest earned must be recognized, therefore "A) Credit to Interest Revenue for $ 149"

The interest calculation is:

8500 x 0.07 x (90/360) =

8500 x 0,07 x 0,25 = 148,75 and we round to $149.