What is the adjusting entry to record interest for Elegant Company (the debtor) as of December 31 if Pristine Company (the holder of the note) receives a $29,000, 90-day, 12% note on December 10th from Elegant Company (debtor)? (Use a 360-day year. Do not round any intermediate calculations. Round your final answer to the nearest dollar.)
A) Debit to Interest Income of $870; credit to Interest Receivable of $870.
B) Debit to Interest Payable of $203; credit to Interest Expense of $203.
C) Debit to Interest Expense of $203; credit to Interest Payable of $203.
D) Debit to Interest Receivable of $870; credit to Interest Income of $870.

Question

Quizplus · Accepted Answer

The interest for the period from December 10 to December 31 (21 days) needs to be calculated and recorded by Elegant Company (the debtor). The interest amount is calculated as follows: $ \frac{29,000 \times 12\% \times 21}{360} = \$203 $. Therefore, the adjusting entry involves debiting Interest Expense and crediting Interest Payable for $203.

What Is the Adjusting Entry to Record Interest for Elegant