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24 February, 22:30

XYZ Corporation loaned $600,000 to another corporation on December 1, 2020 and received a 3-month, 8% interest-bearing note with a face value of $600,000. What adjusting entry should Starr make on December 31, 2020

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  1. 24 February, 23:26
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    Dr Interest Receivable 4,000

    Cr Interest Revenue 4,000

    Explanation:

    Preparation of XYZ Corporation Adjusting entry

    Since the XYZ Corporation loaned the amount of $600,000 to another corporation on December 1, 2020 in which XYZ Corporation received a 3 month and 8% interest-bearing note with a face value of $600,000, the first step to take is to find the interest bearing note which is calculated as 4,000 (1/12*8%*600,000) and the second step is to record the transaction as:

    Dr Interest Receivable 4,000

    Cr Interest Revenue 4,000

    (1/12*8%*600,000)
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