On November 1, Carter Company signed a 120-day, 10% note payable, with a face value of $9,000. What is the adjusting entry for the accrued interest at December 31 on the note?
A) Debit interest expense, $0; credit interest payable, $0.
B) Debit interest expense, $100; credit interest payable, $100.
C) Debit interest expense, $150; credit interest payable, $150.
D) Debit interest expense, $200; credit interest payable, $200.
E) Debit interest expense, $300; credit interest payable, $300.

Question

Quizplus · Accepted Answer

The interest for two months (November and December) needs to be calculated: $9,000 * 10% * (60/360) = $150. This amount represents the interest expense that has accrued by December 31.

On November 1, Carter Company Signed a 120-Day, 10% Note