Credit $4800 Merchandise Sales.
At the end of October there must have been an entry to debit Interest Receivable $20 and Interest INCOME recognized that month. The only logical way that would work is if October 31 was the end of the fiscal year for TechCom.
Then rather than make a routine entry at month end for the remaining 75 days (or someone just forgot to make them) the remaining interest was recognized as income when it was paid.
You should challenge this problem with your instructor. It really depends on how the beginning entries were done, and how interest was handled month to month. And Accrual Accounting would post the interest right off.
Teller purchased merchandise from TechCom on October 17 of the current year. TechCom accepted Teller's $4,800, 90-day, 10% note as payment. What entry should TechCom make on January 15 of the next year when the note is paid?
I know this is the answer
C. Cash 4,920, Interest Revenue 100, Interest Receivable 20, Notes Receivable 4,800
I don't understand why it is not
cash 4920
interest rev 120
NOtes rec 4800
