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Data relating to the balances of various accounts affected by adjusting or closi

ID: 2351184 • Letter: D

Question

Data relating to the balances of various accounts affected by adjusting or closing entries appear below. (The entries which caused the changes in the balances are not given.) You are asked to supply the missing journal entries which would logically account for the changes in the account balances. Interest receivable at 1/1/10 was $5,000. During 2010 cash received from debtors for interest on outstanding notes receivable amounted to $5,000. The 2010 income statement showed interest revenue in the amount of $4,900. You are to provide the missing adjusting entry that must have been made, assuming reversing entries are not made. For each journal entry write Dr for debit and Cr for credit.

Please show detailed computations

Explanation / Answer

Two following journal entries are made.

1) Cash collected

Dr. Cash 5,000

Cr. Interest receivable 5,000

2) adjusting entry

Dr. Interest receivable 4,900

Cr. Interest revenue 4,900