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21 February, 08:37

Pina Colada Corp. lends Sheffield industries $56400 on August 1, 2022, accepting a 9-month, 6% interest note. If Pina Colada Corp. prepares its financial statements as of December 31, 2022, what adjusting entry must it make?

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  1. 21 February, 11:12
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    31 December 2022 Interest Receivable $1410 Dr

    Interest Revenue $1410 Cr

    Explanation:

    The adjusting entry made on 31 December will record the interest revenue that relates to this year from August to December following the accrual principle. The interest revenue for these 5 months is 56400 * 0.06 * 5/12 = $ 1410

    The interest is not received now as it will be received on note's maturity. Thus, we will debit the interest receivable account which is an asset.
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