On November 1, 2012, EZ Products borrowed $48,000 on a 5%, 10-year note with annual installment payments of $4,800 plus interest due on November 1 of each succeeding year. Which of the following journal entries would be needed at December 31, 2012 to accrue interest from November 1 through year-end?

Question

Quizplus · Accepted Answer

Option A is incorrect because it records the entire payment as principal only and does not account for any interest expense.
Option B is correct because it records the interest expense for the two months between November 1 and December 31 as an accrual.
Option C is incorrect because it records the entire payment as a reduction of principal and does not account for any interest expense.
Option D is incorrect because it records the entire payment as interest only and does not account for any reduction of principal.

On November 1, 2012, EZ Products Borrowed $48,000 on a 5