Question

For the current year, Bubbles Office Supply had earned $600 of interest on investments. As of December 31, none of this interest had been received or recorded. Demonstrate the required half of the adjusting entry by choosing the correct statement below.

Answer 1

Answer:

Debit interest receivable account by $600.

Explanation:

According to accrual method of accounting, the interest of $600 as at December 31 has already been earned even if it had not been received. We must record it for the period it was earned.

The entry is passed into Interest Receivable account as a debit. Interest Receivable account is a current asset account. When asset accounts increase you debit, and when the reduce you credit.

So in this case the balance in Interest Receivable increases and we debit $600.