Homework Answers
ANSWER
| Date | General Journal | Debit | Credit |
| 31-Dec-21 | Interest Receivable | $2,000 | |
| Interest Revenue | $2,000 |
Explanation
The Company has loaned $30,000 at 10% on May 1. Adjusting entry is to be passed on December 31 which is Eight months from the issue date. Therefore interest has been accrued at 10% for 8 months.
Interest accrued = $30,000 * (10/100) * (8/12)
= $2,000
Hence Interest Receivable account needs to be debited by $2,000 since it is an asset and Interest revenue needs to be credited by $2,000 since interest is revenue based on accrual concept of accounting.
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