On November 1, 2020, France Corp. signed a three-month, zero-interest-bearing note for the purchase of $60,000...

On November 1, 2020, France Corp. signed a three-month, zero-interest-bearing note for the purchase of $60,000 of inventory. The maturity value of the note was $60,600, based on the bank’s discount rate of 4%. The adjusting entry prepared on December 31, 2020 in connection with this note will include a:

a. debit to Note Payable for $400.

b. credit to Interest Expense for $200.

c. debit to Interest Expense for $600.

d. credit to Note Payable for $400.

Expert Solution


Correct Option d. credit to Note Payable for $400.


Interest Expense = (Note Value * Rate of Interest * Months elapsed)/12
=600004%2/12
400

Entry would be

Accounts Name	Debit	Credit
Interest Expense	400
Note Payable		400
(To record interest Expense)

ekkarill92 answered 2 years ago

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