On October 1, 2015, Zircon Jewelry Company accepted a 4-month, 10% note for $2,400 in settlement of an overdue account receivable. Interest revenue was accrued through December 31, 2015. Zircon receives the maturity value of the note on the due date. Give journal entry to record the collection of funds.

The journal entry is shown below:

Cash A/c Dr $2,480

To Interest receivable $60

To Interest revenue $20

To Note receivable $2,400

(Being the collection of funds is recorded)

The computation of interest receivable is shown below:

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

= $2,400 * 10% * (3 months : 12 months)

= $60

And for interest revenue would be

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

= $2,400 * 10% * (1 months : 12 months)

= $20