Question

Stellar Enterprises made the following entry on December 31, 2020. Interest Expense 6,490 Interest Payable 6,490 (To record interest expense due on loan from Anaheim National Bank) (a) What entry would Anaheim National Bank make regarding its outstanding loan to Stellar Enterprises

Answer 1

Answer:

Interest Receivable               6,490 debit

              Interest Revenue                6,490 credit

(To record interest revenue from Stellar Enterprises loan)

Explanation:

The banks accounting will reflect the  accrued interest as well. From their perpective, the interest are revenue as they are the lender of the loan.

It will recognize the interest revenue from the accounting period

and will declare the interest receivable for the same amount.

From this we can deduct:

the payable from one entity is a receivable for another entry.

the interest expense from one firm will be interest revenue for another.