on november 1, jasper company loaned another company $100,000 at a 6% interest rate. the note receivable…

on november 1, jasper company loaned another company $100,000 at a 6% interest rate. the note receivable plus interest will not be collected until march 1 of the following year. the companys annual accounting period ends on december 31, and adjustments are only made at year - end. the adjusting entry needed on december 31 is:\nno entry required.\ndebit interest receivable, $500; credit interest revenue, $500.\ndebit interest expense, $5,000; credit interest payable, $5,000.\ndebit interest receivable, $1,000; credit interest revenue, $1,000.\ndebit interest expense, $1,000; credit note payable, $1,000.

on november 1, jasper company loaned another company $100,000 at a 6% interest rate. the note receivable plus interest will not be collected until march 1 of the following year. the companys annual accounting period ends on december 31, and adjustments are only made at year - end. the adjusting entry needed on december 31 is:\nno entry required.\ndebit interest receivable, $500; credit interest revenue, $500.\ndebit interest expense, $5,000; credit interest payable, $5,000.\ndebit interest receivable, $1,000; credit interest revenue, $1,000.\ndebit interest expense, $1,000; credit note payable, $1,000.

Answer

Explanation:

Step1: Calculate the time period

The loan was made on November 1 and the year - end is December 31. So the time period $t=\frac{2}{12}$ years.

Step2: Calculate the interest revenue

The principal amount $P = 100000$ and the annual interest rate $r=6%=0.06$. Using the simple - interest formula $I = Prt$, we have $I=100000\times0.06\times\frac{2}{12}=1000$. Since the interest has been earned but not yet received, we debit Interest Receivable and credit Interest Revenue.

Answer:

Debit Interest Receivable, $1,000; credit Interest Revenue, $1,000