On November 1,Alan Company signed a 120-day,8% note payable,with a face value of $9,000.What is the adjusting entry for the accrued interest at December 31 on the note? (Use 360 days a year.)
A)No adjusting entry is required.
B)Debit interest payable,$120; credit interest expense,$120.
C)Debit Interest Expense,$120; credit Interest Payable,$120.
D)Debit Interest Expense,$720; credit Interest Payable,$720.
E)Debit Interest Payable,$240; credit Interest Expense,$240.

Question

Quizplus · Accepted Answer

The note was signed on November 1 and the accrued interest at December 31 would be for 60 days (November and December). The formula to calculate the accrued interest is: face value x interest rate x time.
$9,000 x 8% x 60/360 = $120
Therefore, the adjusting entry is to debit Interest Expense for $120 and credit Interest Payable for $120.

On November 1,Alan Company Signed a 120-Day,8% Note Payable,with a Face