Question

On the first day of January, Builders Company borrowed $6,000 on a one-year note payable bearing interest at 5% per year. The note specifies that principal and Interest must be paid in full at the end of the one-year period. On June 30, the adjusted trial balance will show Interest Payable of O A $300 debit B. $300 credit OC. $150 debit OD. $150 credit lomil he COPI om hom copy 2. tems hacmi home Copy.pl intants Click to select your answer noomla copy.pdf regulations ZELELLE DI

Answer 1

Amount borrowed on January $6,000

Interest rate 5% per annum

Interest payable as on June 30 ( that is for 6 months) = $6,000 x 5% x 6/12

                                                                                    =$150.

The journal entry will be

Interest Expenses A/c Dr.                   $150

            To Interest Payable a/c                       $150

Therefore, option D is correct. On June 30, the adjusted trial balance will show interest payable of $150 credit. All the other options are wrong.

In Option A computed interest payable amount for the whole year and the wrongly debit has given to interest payable acount.

Option B computed interest payable amount for the whole year.

In Option C computed interest payable amount correctly for the half year but it has wrongly given debit to interest payable acount.