Question

On November 1, Sanddel Corporation accepted a 3 month note receivable for services provided. The terms of the note were $8,000 face value with 6% interest. Sanddel Corporation closes its books on December 31. What is the entry for accrued interest on December 31?

Answer 1

Explanation:

The adjusting entry is recorded below:

On December 31

Interest Expense A/c Dr $40

          To Accrued Interest A/c $40

(Being accrued interest is recorded)

The computation of the accrued interest is shown below:

= Note receivable × interest rate × number of months ÷ total number of months in a year

= $8,000 × 6% × 1 months ÷ 12 months

= $40