Baden Industries borrows $20,000 at 7% annual interest for six months on October 1, 2022.Which is the appropriate entry to accrue interest if Baden employs a December 31, 2022, fiscal year?
A)Dr Interest Expense $350 Cr Interest Payable $350
B)Dr Interest Expense $1,400 Cr Interest Payable $1,400
C)Dr Interest Expense $350 Cr Notes Payable $350
D)Dr Notes Payable $1,400 Cr Interest Payable $1,400

Question

Quizplus · Accepted Answer

The interest for three months (October to December) is $20,000 * 7% * (3/12) = $350. The entry should debit Interest Expense and credit Interest Payable for $350.

Baden Industries Borrows $20,000 at 7% Annual Interest for Six