Question

On November 19, Nicholson Company receives a $24,600, 60-day, 10% note from a customer as payment on account. What adjusting entry should be made on the December 31 year-end? (Use 360 days a year.)

Answer 1

Answer:

Explanation:

The adjusting entry is shown below:

Interest expense A/c Dr $287

            To Interest payable A/c $287

(Being accrued interest adjusted)

The computation is shown below:

Principal × rate of interest × number of days ÷ (total number of days in a year)  

= $24,600 × 10% × (42 days ÷ 360 days)

= $287

( 11 days in November + 31 Days in December)