On September 1, 2016, a company issued a $50,000, 6-month, 9% note payable to purchase equipment.At December 31, 2016, the company records an adjusting entry to accrue interest incurred by not paid.The company pays the note with interest at the maturity date.
-Use the information above to answer the following question.What is the adjusting journal entry at December 31 to record the accrued interest on the note payable?
A) Debit Interest Expense and credit Interest Payable for $1,500
B) Debit Interest Expense and credit Interest Payable for $2,000
C) Debit Interest Expense and credit Interest Payable for $4,500
D) Debit Interest Payable and credit Cash for $2,000

Question

Quizplus · Accepted Answer

The interest on the note payable for 4 months (September, October, November, and December) can be calculated as follows: 
Interest = Principal x Rate x Time 
= $50,000 x 9% x (4/12) 
= $1,500

Therefore, the adjusting journal entry at December 31 to record the accrued interest on the note payable will be: 
Debit Interest Expense $1,500 
Credit Interest Payable $1,500

Option A is the correct answer.

On September 1, 2016, a Company Issued a $50,000, 6-Month