On November 1, 2014, Chancellor Co.borrowed $80,000 from State Bank and signed a 12%, six-month note payable, all due at maturity.The interest on this loan is stated separately.At December 31, 2014, the adjusting entry for this note includes a:

Question

Quizplus · Accepted Answer

The adjusting entry for the note payable includes a credit to Interest Payable for the amount of interest incurred but not yet paid, which in this case is $1,600 ($80,000 x 12% x 1/2 year). The other options are not correct as they do not reflect the proper treatment of the interest expense and the notes payable account.