On May 1, the Chris Company borrowed $30,000 from the Third Street Bank on a 1-year, 6% note. If the company keeps its records on a calendar year, an adjustment is needed on December 31 to increase
A) Interest Payable, $900.
B) Interest Expense, $600.
C) Interest Payable, $1,200.
D) Interest Expense, $1,800.

Question

Quizplus · Accepted Answer

The interest for the year is $30,000 * 6% = $1,800. By December 31, 8 months of interest have accrued, which is $1,800 * (8/12) = $1,200. Therefore, Interest Payable should be increased by $1,200.

On May 1, the Chris Company Borrowed $30,000 from the Third