On November 6, an 8%, 90-day, $3,000 note was accepted by Carmen in exchange for merchandise. What entry does Carmen make on December 31 to recognize the interest? (Use a 360-day year. Do not round any intermediate calculations. Round your final answer to the nearest cent.)
A) Debit Interest income; credit Interest Receivable for $36.67
B) Debit Interest Receivable; credit Interest Income for $36.67
C) Debit Interest Receivable; credit Interest Income for $240.00
D) None of these answers is correct.

Question

Quizplus · Accepted Answer

Carmen needs to recognize the interest earned from November 6 to December 31. The interest for this period is calculated as $3,000 * 8% * (55/360) = $36.67. Therefore, she debits Interest Receivable and credits Interest Income for $36.67.

On November 6, an 8%, 90-Day, $3,000 Note Was Accepted