Elsdon Inc.borrowed $21,000 on a one-year Note Payable with an interest rate of 10% per year on June 1.It will repay the principal and interest at the end of the one-year period.The company makes accrual adjustments at the end of each month.The company should record interest expense of $2,100 on June 30.

Question

Quizplus · Accepted Answer

Since the company only borrowed the money on June 1, the interest expense for the month of June would not be the full 10% annual rate. To calculate the correct interest expense for June, you would need to take $21,000 x 10% x (30/360) = $175. Therefore, the correct answer would be B.