Maniar, Inc. received a $32,000 30-day, 9% note dated December 21, 2016 from Lek

Question

Maniar, Inc. received a $32,000 30-day, 9% note dated December 21, 2016 from Lekas Company. On December 31, 2016, Maniar made the necessary adjusting entry to accrue interest income on the note.

Maniar’s entry to record payment of the note on January 20, 2017 was:

Select one:

A.

Cash

32,240

Interest income

240

Notes receivable

32,000

B.

Cash

32,080

Interest income

80

Notes receivable

32,000

C.

Cash

32,240

Interest receivable

80

Interest income

160

Notes receivable

32,000

D.

Cash

32,160

Interest income

160

Notes receivable

32,000

Cash

32,240

Explanation / Answer

Option C :

Reason:

On 21st Dec journal entry

Notes receivable 32000

To lekas company.(account receivable) 32000

On 31st Dec. Journal entry

Interest receivable 80 (32000*9%*10/360)

To interest income. 80

On Jan 20th. Journal entry

Cash 32240

To. Interest receivable 80

To. Interest income. 160(32000*9%*20/360)

To. Notes receivable. 32000

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