Which of the following statements is correct regarding the adjustment to record interest accrued on a note payable?
A)Interest on the note payable is classified as an expense since it is a cost of borrowing.
B)Interest on a note payable should be credited to Notes Payable because it increases the amount of principal to be repaid at the maturity of the note.
C)Interest on the note payable is classified as revenue since it is an amount that can be earned on investments.
D)Interest on the note payable will not accumulate because it is paid at the end of each year.

Question

Quizplus · Accepted Answer

A company incurs interest each month on its unpaid note payable.An adjustment is needed to record the Interest Expense relating to the current accounting period and,because this interest has not yet been paid,the adjustment also must record a liability called Interest Payable.

Which of the Following Statements Is Correct Regarding the Adjustment