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eduard
3 years ago
5

On October 1, Black Company receives a 10% interest bearing note from Reese Company to settle an $21,800 account receivable. The

note is due in six months. At December 31, Black should record interest revenue of:
a. $0
b. $450
c. $900
d. $1,800
Business
1 answer:
Natali5045456 [20]3 years ago
7 0

Answer:

At December 31, Black should record interest revenue of: $545

Explanation:

Black Company receives a 10% interest bearing note from Reese Company to settle an $21,800 account receivable.

The amount of the interest per year = 10% x $21,800 = $2,180

At December 31, following 3 months, the interest accrual = $2,180/12 x 3 = $545

Journal entries to record the interest accrual:

Debit Interest receivable $545

Credit Interest revenue $545

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