On October 1,2013,you borrow $200,000 at 6% interest and record the promissory note.In April and again in October of the following year,you are required to pay half the annual interest to your creditor.On December 31,2013,your adjusting journal entry for the quarter should:
A)debit Interest Expense for $3,000 and credit Interest Payable for $3,000.
B)debit Interest Payable for $3,000 and credit Interest Expense for $3,000.
C)debit Interest Expense for $6,000 and credit Cash for $6,000.
D)debit Interest Expense for $6,000 and credit Interest Payable for $6,000.

Question

Quizplus · Accepted Answer

The interest for the quarter (October to December) is calculated as $200,000 * 6% * (3/12) = $3,000. The adjusting entry should record this accrued interest as an expense and a payable.

On October 1,2013,you Borrow $200,000 at 6% Interest and Record