[Anonymous]

Why is there an entry for interest receivable for the March 1 interest payment but not the September 1 interest payment?

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Example: Simple interest note, stated rate equals market rate. A calendar-year fiscal-year firm receives a three-year, 6%, $10,000 note on March 1 of the current year from a sale. The note pays interest each September 1 and March 1. The first four entries are shown:

March 1

Note Receivable 10,000

Sales 10,000

September 1

Cash (.06(1/2)$10,000) 300

Interest Revenue 300

December 31

Interest Receivable (.06(4/12)$10,000) 200

Interest Revenue 200

March 1 (following year)

Cash 300

Interest Receivable 200

Interest Revenue (.06(2/12)$10,000) 100

[mla1169]

Because the Sept payment went directly to interest revenue. At year end an accrual was made to show the revenue accrued but not received so it was the first time a receivable was set up.

In sept they could have done two entries instead of one- debit receivable and credit revenue then debit cash and credit receivable. The debit and credit to receivable would cancel each other out so to simplify cash was debited and revenue credited.

FAR- 77
AUD -49, 71, 84
REG -56,75!
BEC -75

Massachusetts CPA (non reporting) since 3/12.

[Anonymous]

Much thanks. And I can't believe I didn't see that. This is like the 5th doh moment I've had.

[mla1169]

Honestly your biggest problem is self doubt. Ask lots of questions like you're doing but start to trust that you've passed 2 which indicates you're more than capable!

FAR- 77
AUD -49, 71, 84
REG -56,75!
BEC -75

Massachusetts CPA (non reporting) since 3/12.

[jstay]

question: why wouldnt this not be recored at present value?

[mla1169]

Because they tell you up front “simple interest note”.

FAR- 77
AUD -49, 71, 84
REG -56,75!
BEC -75

Massachusetts CPA (non reporting) since 3/12.

[jstay]

ahhh ok thanks. but if it was a non interest bearing note..then it would be at present value?

[Author]

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