Would someone please tell me if I'm getting this concept right, in terms of the following example:
On Dec 1, 2005, the company deposited, say, $36500 at 1%/year (interest=$365/year or $1/day), which matures on February 28, 2006 along with the interest ($36500+$90)
On the income statement for the year ended Dec 31, 2005, do you record (on an accrual basis): Interest income: $31 (31 days in December at $1/day)
On the balance sheet for Dec 31, 2005: Cash: $0 Short term investments: $36500 Interest receivable: $31 (2005 portion)
Then, in 2006, assuming no other income: Income statement for year ended Dec 31, 2006: Interest income: $59 (31+28 days in Jan/Feb'06)
Balance sheet for Dec 31, 2006: Cash: $36590 (deposit matured on Feb 28, '06) Short term investments: $0 Interest receivable: $0
Also, let's say at some time between Jan1 and Feb28 '06, the company withdrew a part of the deposit along with the interest up to that point, leaving the remaining to be matured on Feb 28. In that case, would the statements be unchanged except for a lower amount of interest income and cash for 2006?
Thanks for any help.