Use this information to answer the following question. The transactions below pertain to Broyer Company,whose fiscal year ends September 30.
Sept. 10 Received cash for a 90-day, 12 percent, $ \$ 25,000 $ note payable. Interest is in addition to the face value.
30 Made end-of-year adjusting entry to accrue interest expense.
The September 30 adjusting entry,rounded to the nearest dollar,to accrue the interest expense on the note payable is:

Question

Use this information to answer the following question. The transactions below pertain to Broyer Company,whose fiscal year ends September 30.
Sept. 10 Received cash for a 90-day, 12 percent, $ \$ 25,000 $ note payable. Interest is in addition to the face value.
30 Made end-of-year adjusting entry to accrue interest expense.
 The September 30 adjusting entry,rounded to the nearest dollar,to accrue the interest expense on the note payable is:

Quizplus · Accepted Answer

The adjusting entry is needed to accrue the interest expense on the note payable that has been incurred but not yet paid as of September 30. This means that Broyer Company owes interest to the lender for the period from the last payment date to September 30. The interest payable account is used to record this obligation until it is paid. Therefore, the entry should be:

Interest Expense 164
Interest Payable 164

Option A is incorrect because it debits cash, which is not needed at this point.
Option B is incorrect because it credits cash, which is not what is happening here.
Option D is incorrect because it credits notes payable, which is not applicable either.

Use This Information to Answer the Following Question $25,000 \$ 25,000 $25,000

Use This Information to Answer the Following Question $\$ 25,000$