On November 1, Greenfield Corporation borrowed $55,000 from a bank and signed a 12%, 90-day note payable in the amount of $55,000.If you assume 360 days in year, the November 30 adjusting entry will be:

Question

Quizplus · Accepted Answer

The adjusting entry on November 30 for Greenfield Corporation's note payable will be to accrue interest expense and interest payable for one month (30 days).

To calculate the interest expense, we can use the formula:

Interest expense = (Principal x Rate x Time) / 360

Principal = $55,000 
Rate = 12% 
Time = 30 days

Interest expense = ($55,000 x 0.12 x 30) / 360 = $550

Therefore, the adjusting entry will be to debit Interest Expense for $550 and credit Interest Payable for $550. This recognizes the expense for the month and the liability to pay interest at a later date. Option C is the correct choice.

On November 1, Greenfield Corporation Borrowed $55,000 from a Bank