Question

Jasper makes a $25,000, 90-day, 7% cash loan to Clayborn Co. Jasper's entry to record the collection of the note and interest at maturity should be: (Use 360 days a year.)

Answer 1

Answer: B) Debit Cash $25,437.50, credit Interest Revenue $437.50; credit Notes Receivable $25,000.

Explanation:

The interest revenue for the period of 90 days will be;

= 25,000 * 7% * $\frac{90}{360}$

= $437.50

Total to be received

= 25,000 + 437.50

= $25,437.50

The entry to record will therefore be;

DR Cash $25,437.50

CR Interest Revenue $437.50

CR Notes Receivable $25,000