Question

On October 31, 2015, a company signed a note for $50,000 with a bank. The terms were 10% for 9 months. On December 31, 2015, adjusting entries are recorded. What is the correct adjusting entry for this event

Group of answer choices

Debit Interest Expense and credit Interest Payable for $833.33.

. Debit Interest Expense and credit Notes Payable for $833.33.

Debit Interest Payable and credit Interest Expense for $3,750.

Debit Interest Expense and credit Interest Payable for $3,750.

Answer 1

Answer : Debit interest Expenses and Credit interest Payables $ 833,33.    Option one

Interest Payable at Year End = 50,000*10%*2/12 = 833,33

Adjustment Entry

Debit : Interest Expenses $ 833,33

Credit : Interest Payables $833.33