Question

Brief Exercise 3-8 Included in Swifty Company’s December 31 trial balance is a note receivable of $10,080. The note is a 4-month, 10% note dated October 1. Prepare Swifty’s December 31 adjusting entry to record $252 of accrued interest, and the February 1 journal entry to record receipt of $10,416 from the borrower. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No entry" for the account titles and enter 0 for the amounts. Record journal entries in the order presented in the problem.)

Answer 1

Step-by-step explanation:

The journal entry is shown below:

On December 31:

Interest Receivable A/c Dr $252

To Interest revenue $252

(Being accrued interest recorded)

On February 1

Cash A/c Dr $10,416

To Interest Receivable $252

To Interest revenue $84

To Notes receivable $10,080

(Being received amount is recorded)

The interest revenue is computed by

= Notes receivable × 10% × (number of month ÷ total number of months in a year)

=$10,080 × 10% × (1 month ÷ 12 months)

= $84

The 1 month is calculated from December 31 to February 1