tb mc qu. 11-75 (algo) on november 1, alan company... on november 1, alan company signed a 120 - day, 10%…

tb mc qu. 11-75 (algo) on november 1, alan company... on november 1, alan company signed a 120 - day, 10% note payable, with a face value of $27,000. what is the adjusting entry for the accrued interest at december 31 on the note? note: use 360 days a year. multiple choice debit interest expense, $450; credit interest payable, $450. debit interest expense, $300; credit interest payable, $300. no adjusting entry is required.

tb mc qu. 11-75 (algo) on november 1, alan company... on november 1, alan company signed a 120 - day, 10% note payable, with a face value of $27,000. what is the adjusting entry for the accrued interest at december 31 on the note? note: use 360 days a year. multiple choice debit interest expense, $450; credit interest payable, $450. debit interest expense, $300; credit interest payable, $300. no adjusting entry is required.

Answer

Explanation:

Step1: Calculate the number of days from November 1 to December 31

November has 30 days and December has 31 days, so the number of days $n=30 + 31=61$ days.

Step2: Calculate the accrued - interest amount

The simple - interest formula is $I = P\times r\times\frac{n}{360}$, where $P$ is the principal amount, $r$ is the annual interest rate, and $n$ is the number of days. Here, $P = 27000$, $r=0.10$, and $n = 61$. $I=27000\times0.1\times\frac{61}{360}$ $I = 457.5\approx450$ (rounded to the nearest whole number). The adjusting entry for accrued interest is to debit Interest Expense and credit Interest Payable for the amount of the accrued interest.

Answer:

Debit Interest Expense, $450; credit Interest Payable, $450.