Question

Vaughn Manufacturing lends Wildhorse Co. $51600 on April 1, accepting a four-month, 6% interest note. Vaughn Manufacturing prepares financial statements on April 30. What adjusting entry should be made before the financial statements can be prepared

Answer 1

Answer: See explanation

Explanation:

Based on the scenario in the question, there will be a debit to interest receivable in the amount of:

= $51600 × 6%/12

= $51600 × 0.06/12

= $51600 × 0.005

= $280

Interest revenue will also be credited in the amount of $280

Debit: Interest receivable $280

Credit: Interest revenue $280