On November 1,2017,Brownsville Co.borrowed $80,000 from State Bank and signed a 12%,six-month note payable,all due at maturity.The interest on this loan is stated separately.At December 31,2017,the adjustment for this note includes a(n)
A)increase to interest expense for $3,200.
B)increase to notes payable for $1,600.
C)decrease to cash for $4,800.
D)increase to interest payable for $1,600.

Question

Quizplus · Accepted Answer

The interest expense for the period is $80,000 x 12% x 6/12 = $4,800. The interest payable at December 31, 2017 is $4,800 - $1,600 = $3,200.