On March 1, 2021, Bearcat lends an employee $20,000. The employee signs a note requiring principal and interest at 9% to be paid on February 28, 2022. Record the adjusting entry for interest at its year-end of December 31.

Debit interest receivable $1,500

Credit interest revenue $1,500

Explanation:

Adjust entries are used in accounting to record accrued revenue or expense at the end of an accounting period.

On March 1, 2021, Bearcat lends an employee $20,000. The employee signs a note requiring principal and interest at 9% to be paid on February 28, 2022.

We are to calculate the adjustment at December 31, 2021.

We need to calculate interest accrued at year end. The loan would have stayed for 10 months.

Interest = principal * rate * time

Interest = 20,000 * 0.09 * (10/12)

Interest = $1,500

So we will debit interest receivable for $1,500 and credit interest revenue.