On July 1, 2013, Avery Services issued a 4% long-term note payable for $10,000. It is payable over a 5-year term in $2,000 principal installments on July 1 of each year. Which of the following entries needs to be made at year-end 2013 to accrue interest?

Question

Quizplus · Accepted Answer

The entry needed to accrue interest at year-end 2013 would be a debit to Interest Expense for $400 ($10,000 x 4%) and a credit to Interest Payable for $400. Option B reflects this entry. Option A is incorrect because it only shows the debit to Interest Expense without the corresponding credit to Interest Payable. Option C is incorrect because it shows a credit to Interest Expense, which is not correct. Option D is incorrect because it shows a credit to Interest Payable without the corresponding debit to Interest Expense.

On July 1, 2013, Avery Services Issued a 4% Long-Term