Scott Company purchased equipment on November 1, 2010 and gave a 3-month, 9 percent note with a face value of $50,000.The December 31, 2010 adjusting entry is
A)debit Interest Expense and credit Interest Payable, $4,500.
B)debit Interest Expense and credit Interest Payable, $3,750.
C)debit Interest Expense and credit Cash, $750.
D)debit Interest Expense and credit Interest Payable, $750.

Question

Quizplus · Accepted Answer

The interest for two months (November and December) is calculated as $50,000 * 9% * (2/12) = $750. The adjusting entry is to debit Interest Expense and credit Interest Payable for $750.

Scott Company Purchased Equipment on November 1, 2010 and Gave