Marsupial Company signed a three-month, 8% note on November 1, 2016 for the purchase of $120,000...
Marsupial Company signed a three-month, 8% note on November 1,
2016 for the purchase of $120,000 of inventory.
Assuming the company’s accounting period ends on December 31, which
one of the following statements is not correct?
| A. |
On February 1, 2017, the company will debit Interest Payable for $1,600 |
|
| B. |
On December 31, 2016, the company will debit Interest Expense for $1,600 |
|
| C. |
On February 1, 2017, the company will debit Interest Expense for $1,600 |
|
| D. |
On December 31, 2016, the company will credit Interest Payable for $1,600 |
Homework Answers
Statement C is not correct i.e. on february 1,2017, the company will debit interest expense for $1,600.
Explanation :-
Total interest expense = 120,000 x 8% x 3/12 = $2,400
Out of $2,400, interest expense of $1,600 is already recognised on December 31,2016
Therefore, on February 1, 2017, company will debit interest expense for $800.
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