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Harper company lends hewell company $40,000 on march 1, accepting a four-month, 6% interest note. harper company prepares financial statements on march 31. what adjusting entry should be made before the financial statements can be prepared?

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Given:
march 1: loaned 40,000 to Hewell Company
loan term, 4 months, 6% interest on note. 

On March 31, Harper Company should recognize the interest it will earn from the note of Hewell Company.

40,000 x 6% = 2,400 this is the annual interest
2,400 * 1/12 = 200 monthly interest

March 31
                               Debit         Credit

Interest receivable      200
            Interest Revenue            200

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