Manhattan Company recorded an adjusting entry to accrue interest owed of $300 as of December 31,Year 1.When the related note was paid during Year 2,the company paid $450 in interest.Which of the following journal entries correctly records this Year 2 transaction? (Assume that the entry to record the payment of the note itself was recorded in a separate journal entry. )

Question

Quizplus · Accepted Answer

The payment would be recorded with a credit to Cash for $450 to decrease that asset account,a debit to Interest Payable for $300 to decrease that liability account,and a debit to Interest Expense for $150 to balance the entry (for the interest expense to be recognized during Year 2).

Manhattan Company Recorded an Adjusting Entry to Accrue Interest Owed