Question

please answer both questions!!!

Fiat borrowed $80,000 on October 1, 2019. Fiat will not make any payments until October 1, 2021, and at that time, Fiat will pay $84,000. Which of the following correctly states the annual financial statements as of December 31, 2020? O A Interest payable of $2,500; interest expense of $2,500 O B Interest payable of $1,500; interest expense of $2,000 C Interest payable of $4,000; interest expense of $2,500 O D Interest payable of $2,500; interest expense of $2,000 Answered 1 attempt left Change your responses to resubmit Question 6 Homework answered Which of the following best describes a payable? A An amount that was paid before it was incurred. B An amount you are entitled to receive in the future. O C An amount that has been received before it was earned D An amount you owe but have not yet paid. 26%

Answer 1

Fiat

Answer: D. Interest payable of $2,500; interest expense of $2,000

Interest from October 1, 2019 to October 1, 2021 (i.e. 24 months) = $84,000 - $80,000 = $4,000

Interest expense as of December 31, 2020 = $4,000 x 12/24 = $2,000

Interest payable as of December 31, 2020 = $4,000 x 15/24 = $2,500

Answer: D. An amount you owe but have not yet paid.

A payable is an amount that has accrued for goods or services availed but which is not paid. Hence, option D. is the correct answer.

An amount that was paid before it was incurred is an asset. Hence, option A is incorrect.

An amount entitled to be received in the future is a receivable and hence option B is incorrect.

An amount that has been received before it was earned is a liability and hence option C is incorrect.