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Even when a note

Even when a note - in October and then add the result to...

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Even when a note's due date is not expressed in days, adjusting entries that recognize  accrued interest are often calculated in terms of days. Suppose a company holds a four- month, 10%, $10,000 note dated October 19, 20X2. If the company uses an annual  accounting period that ends on December 31, an adjusting entry that recognizes 73  days of accrued interest revenue must be made on December 31, 20X2. To determine  the number of days in this situation, subtract the date of issue from the number of days 
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Unformatted text preview: in October and then add the result to the number of days in November and December (31 - 19 = 12; 12 + 30 + 31 = 73). Notice that when you count days, you omit the note's issue date but include the note's due date or, in this situation, the date that the adjusting entry is made. Assuming the interest calculation uses a 365-day year, the accrued interest revenue equals $200....
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