What is the adjustment to Interest Income on December 31 if Pristine Company (the holder of the note) receives a $26,000, 90-day, 7% note on December 10th from Elegant Company (debtor)? (Use a 360-day year. Do not round any intermediate calculations. Round your final answer to the nearest dollar.)
A) $455
B) $1,820
C) $111
D) $106

Question

Quizplus · Accepted Answer

The interest income adjustment for Pristine Company on December 31 can be calculated as follows: Interest = Principal × Rate × Time = $26,000 × 7% × (21/360) = $1,820 × (21/360) = $105.50, which rounds to $106. The 21 days are from December 10 to December 31.

What Is the Adjustment to Interest Income on December 31