Answer:
b. Debit Interest Receivable and credit Interest Revenue for $10,000
Explanation:
The adjusting entry is shown below:
Interest receivable A/c Dr $1,260
To Interest revenue A/c $1,260
(Being accrued interest is recorded)
The computation of accrued interest is shown below:
= Principal × rate of interest × number of months ÷ (total number of months in a year)
= $250,000 × 6% × (8 months ÷ 12 months)
= $10,000
The 8 month is calculated from May 1 to December 31. And we assume the books are closed on December 31
