Which of the following is true regarding interest?a) Interest payable increases by the amount of...

Which of the following is true regarding interest?

a) Interest payable increases by the amount of interest expense each year.

b) When interest is paid, both interest payable and interest expenses are reduced.

c)The balance of interest payable reduces net income in every period.

d) Inerest expense and interest payable should always have the same balance.

Solutions

Expert Solution

Correct Answer is a) Interest payable increases by the amount of interest expenses each year

Reason : Journal Entry for Interest Expenses payable

Let us assume that Interest Expenses is $100 for the year 2019

Date	Account Title & Explanation	Debit	Credit
12/31/2019	Interest Expenses	$100
	Interest Payable		$100
	( To record Interest expenses for the period 2019)

ekkarill92 answered 2 years ago

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