Question

In: Accounting

On March 1, 2021, Bearcat lends an employee $11,500. The employee signs a note requiring principal...

On March 1, 2021, Bearcat lends an employee $11,500. The employee signs a note requiring principal and interest at 12% to be paid on February 28, 2022. Record the adjusting entry for interest at its year-end of December 31.

Solutions

Expert Solution

The given information is

On 1st March 2021 amount lend to employees - $11500

Employee will pay principal and interest on 28th February 2022.

The interest accrued on the 31 December 2021.

The interest adjusting entry to be passed on 31st December 2021

Calculation of interest till 31st December 2021 :-

The interest is accrued for 10 months (March - December)

= $11500 × 12% × 10/12

= $1150.

The journal entry to be passed on 31st December 2021 for adjusting accrued interest is as follows :-

Interest receivable a/c...............dr $1150

To interest income a/c $1150

(Being interest on amount given to employee is accrued and adjusted)

In the above journal entry the interest receivable is treated as current asset and interest income as income and transferred to profit and loss account.

These are all the information required to solve the given question.

I hope, all the above mentioned explanations and journal entry is useful and helpful to you.

Thank you.

ekkarill92 answered 2 hours ago
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