03. a note of $50,000 with an annual interest of 3% was issued for the purchase of a machine on 10/1/2022…

03. a note of $50,000 with an annual interest of 3% was issued for the purchase of a machine on 10/1/2022. interests were paid semiannually. assuming the fiscal year ends on december 31, the entry to recognize the accrued interest expense on 12/31/2022 would include a:\n\ncredit to interest expense for $375\n\ncredit to interest payable for $375\n\ndebit to cash for $375\n\ndebit to interest receivable for $375

03. a note of $50,000 with an annual interest of 3% was issued for the purchase of a machine on 10/1/2022. interests were paid semiannually. assuming the fiscal year ends on december 31, the entry to recognize the accrued interest expense on 12/31/2022 would include a:\n\ncredit to interest expense for $375\n\ncredit to interest payable for $375\n\ndebit to cash for $375\n\ndebit to interest receivable for $375

Answer

Explanation:

Step1: Calculate annual interest

The principal amount $P = 50000$ and the annual - interest rate $r=3%=0.03$. The annual interest $I_{annual}=P\times r = 50000\times0.03=1500$.

Step2: Calculate interest for 3 months

The time period from 10/1/2022 to 12/31/2022 is 3 months or $\frac{3}{12}=\frac{1}{4}$ of a year. The accrued interest $I = I_{annual}\times\frac{3}{12}=1500\times\frac{1}{4}=375$.

Step3: Determine the journal - entry account

When recognizing accrued interest expense, we debit Interest Expense and credit Interest Payable. So, the entry to recognize the accrued interest expense on 12/31/2022 includes a credit to Interest Payable for $375$.

Answer:

B. credit to interest payable for $375$