On October 1,Year 1,Hartford Company issued a $20,000 face value discount note.The note had a 6% discount rate and a one-year term to maturity.Which of the following would be included in the adjusting entry,dated December 31,Year 1,to recognize interest accrued since the issuance date?

Question

Quizplus · Accepted Answer

Discount = $20,000 × 0.06 × 1 = $1,200
Three months (Oct.1-Dec.31)have passed.
Amortization of discount = Discount of $1,200 × (3 ÷ 12)= $300
The adjusting entry includes a debit (increase)to interest expense and a credit (decrease)to discount on notes payable for $300.

On October 1,Year 1,Hartford Company Issued a $20,000 Face Value