Use this information to answer the following question. The transactions below pertain to Dunhill Company,whose fiscal year ends April 30.
The April 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 Dunhill Company,whose fiscal year ends April 30.
 The April 30 adjusting entry,rounded to the nearest dollar,to accrue the interest expense on the note payable is:

Quizplus · Accepted Answer

The note payable was taken out on January 1, so interest has been accumulating for four months (January, February, March, and April), at a rate of 8% per year. To calculate the interest expense, we need to use the following formula: 
Interest expense = Principal x Rate x Time

The principal is $35,000, the rate is 8%, and the time is 4/12 of a year (since we're accruing interest for four months). Plugging in the numbers, we get: 
Interest expense = $35,000 x 0.08 x (4/12) 
Interest expense = $933.33

Rounding to the nearest dollar, the adjusting entry to accrue interest expense on the note payable is:

Interest expense         $ 933 
Interest payable            $ 933

Therefore, the correct answer is C.

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