Oleke Manufacturing borrowed $20,000 from Second National Bank on January 1.The note is for 9 months with all interest due at the end of the note.The bank is charging the company 9% interest.What adjusting entry is necessary for Oleke Manufacturing on January 31?

Question

Quizplus · Accepted Answer

The adjusting entry needed on January 31 is to record the accrued interest expense and interest payable. 
The interest expense for one month is calculated as follows: 
$20,000 x 9% x 1/12 = $150

Therefore, the correct answer is option A, which records $150 to interest expense and $150 to accrued interest payable.

Oleke Manufacturing Borrowed $20,000 from Second National Bank on January Interest expense 150 Accrued interest payable 150\begin{array}{llc}\text { Interest expense } & 150 & \\\quad \text { Accrued interest payable } & & 150 \\\end{array} Interest expense Accrued interest payable ​150​150​

Oleke Manufacturing Borrowed $20,000 from Second National Bank on January $\begin{array}{llc}\text { Interest expense } & 150 & \\\quad \text { Accrued interest payable } & & 150 \\\end{array}$