Admire County Bank agrees to lend Givens Brick Company $600,000 on January 1. Givens Brick Company signs a $600,000, 8%, 9-month note. What is the adjusting entry required if Givens Brick Company prepares financial statements on June 30?
a.
$\begin{array}{lrr}
\text { Interest Expense } &24,000\
\text { Interest Payable } &&24,000\
\end{array}$

b.
$\begin{array}{lrr}
\text {Interest Expense } &24,000\
\text {Cash } &&24,000\
\end{array}$

c.
$\begin{array}{lrr}
\text { Interest Payable } &24,000\
\text { Cash } &&24,000\
\end{array}$

d.
$\begin{array}{lrr}
\text { Interest Payable } &24,000\
\text { Interest Expense } &&24,000\
\end{array}$

Question

Admire County Bank agrees to lend Givens Brick Company $600,000 on January 1. Givens Brick Company signs a $600,000, 8%, 9-month note. What is the adjusting entry required if Givens Brick Company prepares financial statements on June 30?
a. 
$\begin{array}{lrr}
  \text { Interest Expense } &24,000\
 \text {  Interest Payable } &&24,000\
\end{array}$

b. 
$\begin{array}{lrr}
  \text {Interest Expense  } &24,000\
 \text {Cash  } &&24,000\
\end{array}$

c. 
$\begin{array}{lrr}
  \text {  Interest Payable } &24,000\
 \text { Cash } &&24,000\
\end{array}$

d.
$\begin{array}{lrr}
  \text { Interest Payable  } &24,000\
 \text { Interest Expense } &&24,000\
\end{array}$

Quizplus · Accepted Answer

The adjusting entry required is to record the interest expense for the six months from January 1 to June 30 and to accrue the interest payable as of June 30.

To calculate the interest expense: 
- Principal amount = $600,000 
- Interest rate = 8% 
- Time period = 6 months (from January 1 to June 30)

Interest expense = Principal x Rate x Time 
Interest expense = $600,000 x 8% x 6/12 
Interest expense = $24,000

Therefore, the correct adjusting entry is:

Interest Expense     $24,000 
Interest Payable        $24,000

Admire County Bank Agrees to Lend Givens Brick Company $600,000 Interest Expense 24,000 Interest Payable 24,000\begin{array}{lrr} \text { Interest Expense } &24,000\\ \text { Interest Payable } &&24,000\\\end{array} Interest Expense Interest Payable ​24,000​24,000​

Admire County Bank Agrees to Lend Givens Brick Company $600,000 $\begin{array}{lrr} \text { Interest Expense } &24,000\\ \text { Interest Payable } &&24,000\\\end{array}$