On October 1 2017 Dakota Company issued an $800000 10% nine-month interest-bearing note. If the Dakota Company is preparing financial statements at December 31 2017 the adjusting entry for accrued interest will include a:

A) credit to Notes Payable of $20000.
B) debit to Interest Expense of $20000
C) credit to Interest Payable of $40000.
D) debit to Interest Expense of $30000.

Question

Carly kichler · Accepted Answer

Final Answer : B, Explanation :  The interest for three months (October, November, December) on an $800,000 note at 10% annual interest is calculated as $800,000 * 10% * (3/12) = $20,000. This amount represents the interest expense for the period and should be debited to Interest Expense.

Definitions

Learning Objectives

Learning Objectives

Related questions