Question

On November 1, Jasper Company loaned another company $100,000 at a 6.0% interest rate. The note receivable plus interest will not be collected until March 1 of the following year. The company's annual accounting period ends on December 31, and adjustments are only made at year-end. The adjusting entry needed on December 31 is:

Answer 1

Answer:

Explanation:

The journal entry is shown below:

Interest receivable A/c Dr $1,000

                     To Interest revenue A/c $1,000

(Being accrued interest is recorded)

The computation of accrued interest is presented below:

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

= $100,000 × 6% × (2 months ÷ 12 months)

= $1,000

The 2 months is calculated from November 1 to December 31