trent restaurant borrowed $110,000 on october 1 by signing a note payable to hometown bank. the interest…
trent restaurant borrowed $110,000 on october 1 by signing a note payable to hometown bank. the interest expense for each month is $825. the loan agreement requires trent to pay interest on january 2 for october, november and december.\nread the requirements.\nto accrue interest for december.\n2. post all three entries to the interest payable account and calculate the ending balance as of december 31.\ninterest payable\n| | october 31 | 825 |\n| | november 30 | 825 |\n| | december 31 | 825 |\n| balance | | 2,475 |\n3. record the payment of three months interest on january 2. (record debits first, then credits. select the explanation on the last line of the journal - entry table.)\n| date | accounts and explanation | debit | credit |
Answer
Explanation:
Step1: Identify accounts for payment entry
On January 2, when paying the three - months' interest, we debit the Interest Payable account (which has accumulated the interest expense over the three months) and credit the Cash account.
Step2: Determine the amount
The total interest payable for three months is $2,475 (as calculated in the Interest Payable account balance).
Answer:
| Date | Accounts and Explanation | Debit | Credit |
|---|---|---|---|
| January 2 | Interest Payable | 2475 | |
| Cash | 2475 | ||
| To pay interest for October, November and December |