Question

Question 10 (2 points) Hanson and Co has a 11-month note receivable that it issued on August 1, 2016 for 100,000 to replace an accounts receivable. The interest rate for the note 6%. Prepare the accrual entry for December 31st What account is debited to accrue interest at December 31st? What account is credited to accrue interest at December 31st? What is the amount of the interest accrued at 12/31/16?

Answer 1

1.Interest receivable account should be debited to accrue interest.

reason:-

the accrued interest receivable is a current asset for the hanson and co.,so increase in asset should be debited on 31st december.

2.Interest income account should be credited on 31st december.

reason;-

the interest income is an accrued income and hence income account should be credited as per the rule.

3.the amount of interest accrued on 31st december wil be 2500.

calculation:-

interest due on december=100000*6%*5/12=2500