A company has a loan that accrues interest at a rate of $20 a day.The company pays the interest once a quarter.Which of the following adjustments would be made at the end of a month in which no payment for interest was made?

Question

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Since the interest is accruing daily, the company would need to make an adjustment to record the interest expense they have incurred during the month. They would debit Interest Expense to increase the expense account and credit Interest Payable to signify the liability owed for the interest. Options A and D are incorrect because they do not account for the interest expense that has been accrued but not yet paid. Option B is incorrect because it does not address the interest expense at all.

A Company Has a Loan That Accrues Interest at a Rate