Question

On November 1, 2015, Lendem, Inc. loaned an employee $100,000 at 6% with both the interest and principal due in one year. The adjusting entry to record the interest earned but not received as of December 31, 2015 includes a: A. debit to Interest Receivable of $1,000 B. debit to Interest Revenue of $1,000 C. debit to Interest Payable of $6,000 D. debit to Cash of $5,000 E. debit to Interest Receivable of $6,000

Answer 1

Answer:

A. debit to Interest Receivable of $1,000

Explanation:

The journal entry is given below;

Interest Receivables ($100,000 × 6% × 2 ÷ 12) $1,000.00  

             To Interest Revenue  $1,000.00

(being the interest earned but not received is recorded)

Here the interest receivable is debited as it increased the assets and credited the interest revenue as it also increased the revenue