Martin & Associates borrowed $5,000 on April 1, 2013 at 8% interest with both principal and interest due on March 31, 2014. Which of the following journal entries should the firm use to record the payment of interest on March 31, 2014?
A.
$\begin{array}{llcc}
\text {Dr. Interest payable }\
\text { Cr. Cash } \
\end{array}$

B.
$\begin{array}{llcc}
\text {Dr. Interest receivable } \
\text { Cr. Interest payable } \
\end{array}$

C.
$\begin{array}{llcc}
\text {Dr. Interest expense } \
\text { Cr. Interest payable } \
\end{array}$

D.
$\begin{array}{llcc}
\text { Dr. Interest payable } \
\text { Cr. Interest expense} \
\end{array}$

Question

Martin & Associates borrowed $5,000 on April 1, 2013 at 8% interest with both principal and interest due on March 31, 2014. Which of the following journal entries should the firm use to record the payment of interest on March 31, 2014? 
A.
$\begin{array}{llcc}
  \text {Dr. Interest payable  }\
  \text { Cr. Cash } \
\end{array}$

B.
$\begin{array}{llcc}
  \text {Dr. Interest receivable  } \
 \text { Cr. Interest payable } \
\end{array}$

C.
$\begin{array}{llcc}
  \text {Dr. Interest expense  } \
  \text { Cr. Interest payable } \
\end{array}$

D.
$\begin{array}{llcc}
  \text { Dr. Interest payable  } \
  \text {  Cr. Interest expense} \
\end{array}$

Quizplus · Accepted Answer

The interest payable is recorded as a liability, and when the payment is made, it is debited to reduce the liability and cash is credited to reflect the outflow of cash.

Martin & Associates Borrowed $5,000 on April 1, 2013 at 8