Asked by Mercedes Guevara on May 20, 2024
Verified
On October 1 2017 Dakota Company issued an $800000 10% nine-month interest-bearing note. If the Dakota Company is preparing financial statements at December 31 2017 the adjusting entry for accrued interest will include a:
A) credit to Notes Payable of $20000.
B) debit to Interest Expense of $20000
C) credit to Interest Payable of $40000.
D) debit to Interest Expense of $30000.
Accrued Interest
Interest that has been incurred but not yet paid, typically recorded as a liability on the balance sheet.
- Measure and maintain records of interest on notes payable.
Verified Answer
CK
Carly kichlerMay 24, 2024
Final Answer :
B
Explanation :
The interest for three months (October, November, December) on an $800,000 note at 10% annual interest is calculated as $800,000 * 10% * (3/12) = $20,000. This amount represents the interest expense for the period and should be debited to Interest Expense.
Learning Objectives
- Measure and maintain records of interest on notes payable.
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