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23 January, 07:45

Pharoah Corporation loaned $660000 to another corporation on December 1, 2020 and received a 3-month, 9% interest-bearing note with a face value of $660000. What adjusting entry should Pharoah make on December 31, 2020

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  1. 23 January, 09:28
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    Interest receivable A/c Dr $4,950

    To Interest revenue A/c $4,950

    (Being accrued interest is recorded)

    The computation of accrued interest is shown below:

    = Loan amount * rate of interest * number of months : (total number of months in a year)

    = $660,000 * 9% * (1 months : 12 months)

    = $4,950
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