On September 1, Hauser Corp. borrowed $70,000 from the Metro Bank for five months at 9%. Interest is payable at maturity. The entry Hauser must make on December 31, its year-end, assuming no prior accruals is:

Question

Quizplus · Accepted Answer

The interest for 5 months at 9% would be (70,000 x 0.09 x 5/12) = $2,625.

Since interest is payable at maturity, no prior accruals would have been made.

Therefore, the entry Hauser Corp. must make on December 31 is to record the payment of the loan and the interest due.

The entry would be:

Debit: Notes Payable - $70,000
Debit: Interest Expense - $2,625
Credit: Cash - $72,625