Question - On October 19, 2013, ABC Company sold a delivery vehicle that it no longer needed for $6,500. The company took a note receivable from the customer, Ryan Tower Inc., for this sale. The terms of the note state that it must be repaid in full within three years; however, there is no fixed payment schedule. The note also bears interest at 12% per annum, which is equal to the market rate of interest.
Ryan Tower has made the following payments on the note receivable to date:
Date of payment Total payment Applied to interest
December 31, 2013 $ 1,500.00 $ 156.00
April 15, 2014 $ 1,000.00 $ 177.99
August 6, 2014 $ 800.00 $ 161.01
The payments were applied first to interest and then to principal. Interest income has not been accrued to December 31, 2014. What is the adjusting entry required on December 31, 2014?