On July 1, 20A, Liz Company borrowed $5,000 cash and signed a one year note payable, interest 10 percent, payable on the maturity date, June 30, 20B. The accounting period ends on December 31; therefore, the required adjusting entry on December 31, 20A would be: Debit--Interest payable, $250; Credit--Interest expense, $250.

Question

Quizplus · Accepted Answer

The correct adjusting entry would be to debit Interest Expense and credit Interest Payable for $250, as interest expense is incurred and payable over the period.

On July 1, 20A, Liz Company Borrowed $5,000 Cash and Signed