On December 1,2018,Old World Deli signed a $300,000,5%,six-month note payable with the amount borrowed plus accrued interest due six months later on June 1,2019.Old World Deli should record which of the following adjusting entries at December 31,2018?

Question

Quizplus · Accepted Answer

The interest for one month is calculated as $300,000 * 5% = $15,000 per year. For one month, this is $15,000 / 12 = $1,250. Since the note was signed on December 1, 2018, and the adjusting entry is for December 31, 2018, only one month of interest has accrued. Therefore, the correct entry is to debit Interest Expense and credit Interest Payable for $1,250.

On December 1,2018,Old World Deli Signed a $300,000,5%,six-Month Note Payable