A Company Lends a Major Client $90,000 for One Year

question 55

Multiple Choice

A company lends a major client $90,000 for one year at a 7% annual interest rate.Interest payments are to be made twice a year but the company wants to recognize interest earned on a monthly basis.In a month in which the company does not receive any interest payments,interest is recorded with:

• A)a debit to Cash of $525 and a credit to Interest Revenue of $525.
• B)a debit to Notes Receivable of $525 and a credit to Cash of $525.
• C)a debit to Interest Receivable of $525 and a credit to Interest Revenue of $525.
• D)no adjusting entry,since no transaction has occurred.

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