Unquiet hands, Inc. Borrowed $30,000 on October 1,2019 at 6% interest with both principal and interest...
Unquiet hands, Inc. Borrowed $30,000 on October 1,2019 at 6% interest with both principal and interest due on September 30, 2020. Which of the following journal entries should the firm use to accrue interest at the end of each month ?
a.
| Dr. | Interest receivable |
| Cr. | Interest payable |
b.
| Dr. | Interest payable |
| Cr. | Cash |
c.
| Dr. | Interest expense |
| Cr. | Interest payable |
d.
| Dr. | Interest payable |
| Cr. | Interest expense |
Homework Answers
Answer : c
Above answer is explained below in detail:
Accrued interest means the interest which is payable for the period that has not been paid out. It can be accrued interest revenue for lender or accrued interest expense for the barrower. It follows the matching principle of accounting.
In the given question the barrower need to pay the interest at the end of each month so the interest payable is credited and that amount is debited from interest expense account.
Hope it is clear to you. If you like my answer please give me positive rating.
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