On October 1 2021 Sunset & Vine Wine Shoppe borrows $150000 from the High Country Bank on a 3-month $150000 4% note.Use the following tabular analysis to record Sunset & Vine's adjustment on December 31 2021 before financial statements are prepared:

Question

Quizplus · Accepted Answer

The adjustment on December 31, 2021 for the 3-month 4% note of $150,000 will result in $1,500 interest expense ($150,000 x 4% x 3/12) for the last month of the note. This will increase the Interest Expense account and also increase the Interest Payable account by $1,500 because the interest has been earned but not yet paid. Therefore, the correct choice is C) Increase to Interest Expense and an increase to Interest Payable for $1500.

On October 1 2021 Sunset & Vine Wine Shoppe Borrows