Answer:
The closest answer is C. Cash 2,100 Interest Revenue 100 Notes Receivable 2,000.
Explanation:
The option C above is the closest because Sanger Corp. applies the accrual method of accounting, that was why a note receivable was established. The appropriate journals are:
Debit Cash $2,100
Credit Note receivable $2,000
Credit Interest <em>receivable</em> $100
<em>(Recognition of payment of note receivable with interest)</em>
Note receivable is a promissory note with a written promise made by the borrower to the lender (payee) to pay a certain, definite sum at a specified date.
Interest revenue on the notes is calculated as: Principal x Interest Rate x Time
In this case, the interest revenue is $2,000 x 10%/12 x 6 months = $100.
Note that Sanger Corp. would have been recognizing the interest revenue on a monthly basis and not recognize the whole interest revenue when it became payable. Monthly interest revenue recognition would be:
Debit Interest receivable $16.67
Credit Interest revenue $16.67
<em>(Monthly interest revenue recognition on note)</em>
