Uncle Tupelo\'s Gifts signs a three-month note payable to help finance increases

Question

Uncle Tupelo's Gifts signs a three-month note payable to help finance increases in inventory for the Christmas shopping season. The note is signed on November 1 in the amount of $60,000 with annual interest of 12%. What is the adjusting entry to be made on December 31 for the interest expense accrued to that date, if no entries have been made previously for the interest?



Interest Expense 1,200
Notes Payable 1,200



Interest Expense 1,200
Cash 1,200



Interest Expense 1,200
Interest Payable 1,200



Interest Expense 1,800
Interest Payable 1,800

Explanation / Answer

Interest Expense 1,200 Interest Payable 1,200

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