On august 1, 2018, trico technologies, an aeronautic electronics company, borrows $20.0 million cash to expand operations. the loan is made by firstbanc corp. under a short-term line of credit arrangement. trico signs a six-month, 8% promissory note. interest is payable at maturity. firstbanc corp.’s year-end is december 31. record the acceptance of the note by firstban corp.

                                Debit                  Credit

Loan Receivable      $20,000,000

Cash                                                    $20,000,000  

Interest Receivable     $666,666

Interest Income                                     $666,666        

Explanation:

Interest is calculated by multiplying 0.08 by 20 million and then dividing it by 2 because the loan is a 6 month loan. As Aug- Dec is 5 months we will record revenue of 5/6 of the interest.

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