The Palmer Corporation sells goods to its customers on a note basis with $10\%$ credit terms and interest payable at the end of each quarter. All notes are due in one year. Palmer makes the following sales on July $1,20$X$1$:

Customer Note Maturity Interest Due Interest Rate

J$.$Perez $ $100,000$ Quarterly $10\%$

P$.$Berg $ $100,000$ Negotiated

To encourage sales, Berg was given a special deal on interest. Additional information:

Future value of $$100,000$ in one year $($quarterly interest$)$ is $$110,381.$

Present value of $$100,000$ for one year $($quarterly interest$)$ is $$90,595.$

At the end of the first quarter, which one of the following entries will be made to record the interest earned by Palmer on the Berg note?

Multiple Choice

DR Cash $$2,500$ CR Interest income $$2,500$

DR Accrued interest receivable $$2,500$ CR Interest income $$2,500$

DR Notes receivable$$Berg $$2,265$ CR Interest income $$2,265$

There is no entry because the note is non$$interest bearing.