A company receives interest on a $90,000, 8%, 5-year note receivable each April 1. At December 31,
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Question:
A company receives interest on a $90,000, 8%, 5-year note receivable each April 1. At December 31, 2020, the following adjusting entry was made to accrue interest receivable:
Interest Receivable ............................................................... 5,400
Interest Revenue ....................................................... 5,400
(1) Assuming that the company DOES use reversing entries, what entry should be made on April 1, 2021 when the annual interest payment is received?
(2) Assuming that the company DOES NOT use reversing entries, what entry should be made on April 1, 2021 when the annual interest payment is received?
Please show the work and tell me why there is a difference between these two questions. Thanks!
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