Derm Travel Agency accepted a four-month, 9% interest rate, 52.000 note from

one otits customers on May 1, 2008. The entire balance is payable at the
notes maturity.
Prepare the May 31 adjusting journal entry related to this note.

Do I debit cash and interest receivable; and credit interest revenue.

To determine the correct adjusting journal entry related to this note, we need to consider the interest earned for the month of May.

The note was accepted on May 1, 2008, and has a term of four months. This means that the note will mature on August 31, 2008.

To calculate the interest earned for the month of May, we need to determine the time period between May 1 and May 31. Since this is a 30-day time period, we can use the following formula for simple interest calculation:

Interest = Principal x Rate x Time

Principal: $52,000
Rate: 9% (0.09)
Time: 30 days / 360 days (assuming a 360-day year, common for interest calculations)

Interest = $52,000 x 0.09 x (30/360)
= $390

Therefore, the interest earned for the month of May is $390.

Now, let's prepare the adjusting journal entry:

Date: May 31, 2008
Debit: Interest Receivable - $390
Debit: Interest Revenue - $390 (or a separate Revenue account if applicable)
Credit: Cash - $390

Explanation:
- We debit Interest Receivable to reflect the increase in the amount of interest that Derm Travel Agency has earned but has not yet received. This is an asset account.
- We debit Interest Revenue (or a separate Revenue account if applicable) to recognize the revenue earned from the interest. This increases the agency's revenue.
- We credit Cash to reflect the payment of interest received from the customer. This decreases the agency's cash balance.

Please note that the amounts may vary based on the specific terms and conditions of the note. It is always recommended to consult with an accounting professional or refer to the notes and agreements for accurate information.