On December 16,an 11%,60-day,$2,000 note was issued by Carmen.What entry does Carmen make on December 31 to recognize the interest?
A)Debit Interest Expense; credit Interest Payable $9.17
B)Debit Interest Payable; credit Interest Expense for $9.17
C)Debit Interest Receivable; credit Interest Income for $9.17
D)None of these answers are correct.

Question

Quizplus · Accepted Answer

To recognize the interest on the 60-day, 11%, $2,000 note on December 31, Carmen needs to debit Interest Expense and credit Interest Payable for the amount of interest accrued. The interest accrued for the 15 days between December 16 and December 31 is calculated as follows:
Interest = ($2,000 x 11% x 15/365) = $9.17
Thus, the entry to recognize the interest would be: 
Debit Interest Expense: $9.17
Credit Interest Payable: $9.17

On December 16,an 11%,60-Day,$2,000 Note Was Issued by Carmen