Answer:
Given that,
Amount of money lend to employees on March 1, 2021 = $16,000
Rate of interest = 12 percent
Interest amount and principal to be paid on February 28, 2022.
Interest is accrued on December 31,
Time period = From March 1, 2021 to December 31, 2021
= 10 months
Accrued Interest amount = Principal amount × Interest rate × Time period
= $16,000 × 0.12 × (10 ÷ 12)
= $1,600
Therefore, the adjusting journal entry is as follows:
Interest receivable A/c Dr. $1,600
To interest income $1,600
(To record the interest on amount given to employees is accrued and adjusted)
