Travis County Bank agrees to lend Brickyard Corporation $200,000 on January 1.Brickyard signs a $200,000, 4%, 9-month note.Interest is due at maturity on September 30.The company's fiscal year ends June 30 and adjusting entries are recorded at that time only.
-Use the information above to answer the following question.What journal entry will Brickyard make when paying the interest at maturity?
A) Debit Notes Payable and credit Cash for $206,000
B) Debit Interest Expense for $4,000, and credit Cash for $4,000
C) Debit Interest Expense for $6,000 and Cash for $206,000
D) Debit Interest Payable for $4,000, credit Interest Expense for $2,000, and credit Cash for $6,000

Question

Quizplus · Accepted Answer

By maturity, Brickyard will have accrued $6,000 in interest ($200,000 x 4% x 9/12). By June 30, $4,000 of this interest will have been recorded as Interest Payable. At maturity, Brickyard will debit Interest Payable for $4,000, debit Interest Expense for the remaining $2,000, and credit Cash for the total interest of $6,000.

Travis County Bank Agrees to Lend Brickyard Corporation $200,000 on January