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On October 1, Callison accepts a 5-year interest bearing note receivable for $1,000. The note bears interest of 12%. Both principal and interest are received at maturity. The journal entry required on December 31, Year 1, to accrue interest will include:_______

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Answer:

Dr Interest Receivable $30

Cr Interest Revenue $30

Explanation:

Based on the information given we were told that Callison accepts an interest bearing note receivable for the amount of $1,000 in which the note has the interest of 12%,This means that journal entry on December 31, Year 1, to accrue interest will include:

Dr Interest Receivable $30

Cr Interest Revenue $30

Calculated as :

Accrued interest =12%×$1,000×(3/12)

Accrued interest=$30

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