CPA1979,

Thanks for your reply. What I understand is that the question is asking for Interest on Note Receivable as a Current asset so the interest is calculated for the entire year for 2003 as 8,000. If it was accrued interest at end of Dec 31, 2003 then the interest would be 4,000.

Please correct me if I am wrong.

Hi msod,

In the question, it was worded 'In its June 30, Year 3, balance sheet...?'

Based on this, I think Frame Co. has a June 30 year-end and produces its financial statements on this date. If we make this assumption, then everything should work out. The current asset for interest on the note receivable would then be for the period from July 1, Year 2 to June 30, Year 3, which is the second year of the note and the interest would be (150,000 - 50,000) * 8% = $8,000