On June 1, Year 2, Carolina Company collected a $24,000 note receivable that had been issued on June 1, Year 1. The note carried a 6% interest rate. On June 1, Year 2, the company will recognize interest revenue in the amount of $1,440.
Answer the following statement true (T) or false (F)
False
Only the interest earned during Year 2 of $600 (calculated below) should be recognized in Year 2. The interest earned during Year 1 of $840 (calculated below) should be accrued in an adjusting entry at the end of Year 1.
Recognized in Year 1 (June through December):
Interest revenue = $24,000 × 6% × 7/12 = $840
Recognized in Year 2 (January through May):
Interest revenue = $24,000 × 6% × 5/12 = $600
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