As interest is recorded on an interest-bearing note the Interest Expense account is
A) increased; the Notes Payable account is increased.
B) increased; the Notes Payable account is decreased.
C) increased; the Interest Payable account is increased.
D) decreased; the Interest Payable account is increased.

Question

Quizplus · Accepted Answer

When interest is recorded on an interest-bearing note, the Interest Expense account is increased to reflect the amount of interest incurred. At the same time, the Interest Payable account is also increased because the company now owes additional interest. The Notes Payable account is not directly affected by the recording of interest, as it represents the total amount of the note and not the interest portion. Therefore, neither option A nor B is correct. Option D is also incorrect, as the recording of interest would not decrease the Interest Payable account.

As Interest Is Recorded on an Interest-Bearing Note the Interest