Answer:
The interest revenue will be credited by $7500 on March 31, 2021.
Explanation:
The 5% interest on $600000 notes is for the whole year. The amount of interest for whole year will be = 600000 * 0.05 = $30000
The important thing to note here is that the year end for Clare Barry is on 21 December which means that on 31st December 2020, we will make adjusting entries and for such a note, an adjusting entry will be passed as,
31 Dec 2020 Interest receivable 22500 Dr
Interest Revenue 22500 Cr
This is because the interest of 22500 from April 2020 to December 2020 relates to the period of 2020 and using accrual principle, we will record this as revenue in 2020.
Thus, on 31 March 2021 we will record the interest revenue that pertains to the period of January 2021 to March 2021 which comes out to be,
Interest Revenue = 30000 * 3/12 = $7500
Answer:
$7,500
Explanation:
This can be calculated by following the simple steps below:
Total one-year interest revenue = $600,000 × 5% = $30,000
Monthly interest revenue = $30,000 ÷ 12 = $2,500
Number of relevant months in 2021 = 3 months (i.e. January 1, 2021 to March 31, 2021)
Credit to interest revenue in 2021 = $2,500 × 3 = $7,500
Therefore, Clare Barry's entry on March 31, 2021 to record the payment received would include a credit to interest revenue of $7,500.
