When a Company Has Earned Interest in the Current Period

question 61

Multiple Choice

When a company has earned interest in the current period but has not yet recorded the interest,what type of adjustment is the company required to make?

• A)Make an adjusting entry at the end of the current period to accrue the interest earned.
• B)Make no adjusting entry at the end of the period because interest has not been earned yet.
• C)Make an adjusting entry at the end of the next period to accrue interest earned.
• D)No adjustment is necessary until the cash is collected.

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Definitions:

Sole Shareholder

An individual or entity that owns 100% of the shares of a corporation.

Nonshareholder-Creditors

Creditors of an entity who, unlike shareholders, do not own any part of the entity but have a claim on its assets due to outstanding debts.

Shareholder Domination

A situation where a single shareholder or a group of shareholders exercise significant influence or control over the operations of a corporation.

Individual Shareholder

An individual who owns shares in a company, thereby holding a portion of the ownership.