Johnson issues a $5,000,7%,100-day promissory note to Adam on November 1.What is the adjusting entry made by Johnson on December 31 to recognize the interest (using a 360-day year)?
A)Debit Interest Expense;credit Interest Payable for $58.33
B)Debit Interest Expense;credit Interest Payable for $97.22
C)Debit Interest Receivable;credit Interest Income for $58.33
D)Debit Interest Receivable;credit Interest Income for $97.22

Question

Quizplus · Accepted Answer

The interest for 60 days (from November 1 to December 31) is calculated as $5,000 * 7% * (60/360) = $58.33. The adjusting entry is to debit Interest Expense and credit Interest Payable for this amount.

Johnson Issues a $5,000,7%,100-Day Promissory Note to Adam on November