Question

Harper Company lends Hewell Company $13,200 on March 1, accepting a four-month, 6% interest note. Harper Company prepares financial statements on March 31. What adjusting entry should be made before the financial statements can be prepared? Select the correct answer.

Answer 1

Answer:

Explanation:

The journal entry is shown below:

Interest receivable A/c Dr $66

            To Interest revenue A/c $66

(Being accrued interest is recorded)

The computation of accrued interest is shown below:

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

= $13,200 × 6% × (1 months ÷ 12 months)

= $66

The one month is calculated from March 1 to March 31