Question

On December 1, Daw Co. accepts a $36,000, 45-day, 10% note from a customer. (1) Prepare the year-end adjusting entry to record accrued interest revenue on December 31. (2) Prepare the entry required on the note's maturity date assuming it is honored. (Use 360 days a year.)

Answer 1

ANSWER
Journal Entries
Sr. No.	Date	Account Title and explanation	Debit	Credit
1	December , 31	Interest Receivable	$300
		Interest Revenue		$300
		(Interest revenue accrued at the end of year)
2	15th January	Cash	$36,450
		Interest Recivable		$300
		Interest Revenue		$150
		10% Note		$36,000
		(Record the receipt of note with interest)
	WORKING NOTES:
		Value of note	$36,000
		Interest @ 10%	$3,600
		Days in December expired=	30 Days
		Interest income upto December 31 = $ 3,600 X 30 Days/ 360 Days =	$300
		Interest income in 45 Days =	$450
		($ 3,600 X 45/360 Days)