Travis County Bank agrees to lend Backyard Corporation $200,000 on January 1.Backyard signs a $200,000,4%,9-month note.Interest is due at maturity on September 30. A company pays $18,000 in interest on notes,consisting of $12,000 interest that accrued during the last accounting period and $6,000 of interest accumulated during this accounting period but not previously accrued on the books.The journal entry for the interest payment should:

Question

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The $12,000 interest that accrued during the last accounting period should already be recorded in Interest Payable at the end of the last period, and the $6,000 of interest accumulated during this accounting period but not previously accrued on the books should be recorded as interest expense.

Therefore, the journal entry should be:

Debit Interest Expense for $6,000

Debit Interest Payable for $12,000

Credit Cash for $18,000

Travis County Bank Agrees to Lend Backyard Corporation $200,000 on January