On December 1,Milton Company borrowed $300,000,at 8% annual interest,from the Tennessee National Bank.Interest is paid when the loan matures one year from the issue date.What is the adjusting entry for accruing interest that Milton would need to make on December 31,the calendar year-end?

Question

Quizplus · Accepted Answer

The adjusting entry for accruing interest would involve debiting Interest Expense for $2,000 (which represents 1/12 of the annual interest rate of 8% multiplied by the principal of $300,000) and crediting Interest Payable for $2,000 (since the interest has been earned but not yet paid). Therefore, option B is the correct answer. Options A, C, D, and E involve incorrect amounts or accounts.

On December 1,Milton Company Borrowed $300,000,at 8% Annual Interest,from the Tennessee