Hartford Company borrowed $20,000 on October 1,2016.Hartford issued a one year 6% discount note payable.The adjusting entry necessary to record accrued interest on December 31,2016 would include a:

Question

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The adjusting entry necessary to record accrued interest on December 31, 2016 would include a debit to Interest Expense for $300. This is because the note payable was issued at a discount, which means that the interest expense is recognized over the life of the note rather than upfront. The amount of interest accrued from October 1 to December 31 is $300 ($20,000 x 6% x 3/12), which needs to be recorded as an expense in the current period.

Hartford Company Borrowed $20,000 on October 1,2016