Likert Company calculates that interest of $900 has accrued at December 31 on outstanding notes payable. How should Likert record this on December 31?
A) Prepaid Interest 900
Interest Expense 900
B) Interest Expense 900
Interest Payable 900
C) Interest Expense 900
Cash 900
D) Interest Payable 900
Interest Expense 900
E) None of the above

Question

Quizplus · Accepted Answer

The correct way to record accrued interest on outstanding notes payable is to debit Interest Expense for the amount of interest that has accrued and to credit Interest Payable for the same amount. This reflects the expense incurred and the liability owed but not yet paid.

Likert Company Calculates That Interest of $900 Has Accrued at December