JournaldrillAccrued interest on a customer note
A journal entry exercise from Journaldrill. Solve it with an account picker and debit and credit fields in your browser, and it is checked the moment you submit.
The task
On November 16, Fernway Garden Center accepted a $12,000, 90-day, 8% note receivable from a customer. Interest is collected at maturity. Fernway's year ends December 31; use a 360-day year, and count 45 days from November 16 to December 31. Record the year-end adjustment.
What this exercise teaches
Interest earned so far is $12,000 x 8% x 45/360 = $120. It has been earned, so Interest Revenue is credited, and because it has not been collected the matching asset is Interest Receivable, not Cash. Notes Receivable stays at the $12,000 principal.
A hint if you get stuck
Interest is earned day by day even though no cash arrives until maturity: principal x rate x time, with time as a fraction of 360 days.
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