A company pays $18,000 in interest on notes,consisting of $12,000 interest that accrued during the last accounting period and $6,000 of interest accumulated during this accounting period but not previously recorded on the books.The journal entry for the interest payment should:
A)debit Interest Expense for $18,000 and credit Cash for $18,000.
B)debit Cash for $18,000 and credit Interest Payable for $18,000.
C)debit Interest Expense for $6,000,debit Interest Payable $12,000 and credit Cash for $18,000.
D)debit Interest Payable for $12,000,debit Accrued Interest $6,000 and credit Cash for $18,000.

Question

Quizplus · Accepted Answer

The $12,000 of interest that accrued during the last accounting period should be recorded as a debit to Interest Expense and a credit to Interest Payable. The $6,000 of interest accumulated during this accounting period but not previously recorded should be recorded as a debit to Interest Expense and a credit to Accrued Interest. The payment of $18,000 should be recorded as a credit to Cash. Therefore, the journal entry should be a debit of $6,000 to Interest Expense, a debit of $12,000 to Interest Payable, and a credit of $18,000 to Cash. Choice C matches these debits and credits.

A Company Pays $18,000 in Interest on Notes,consisting of $12,000