Smith borrowed $24 000 on a one-year Loan payable with an interest rate of 10% per year on 1 June.He will repay the principal and interest at the end of the one-year period.Smith makes accrual adjustments at the end of each month.He should record interest expense of $2 400 on 30 June.

Question

Quizplus · Accepted Answer

Smith should record interest expense for one month, not the entire year. The interest for one month is $200 ($24,000 * 10% / 12).

Smith Borrowed $24 000 on a One-Year Loan Payable with an Interest