SurferRosa Music Store borrowed $15,000 from the bank signing a 9%, 3-month note

Question

SurferRosa Music Store borrowed $15,000 from the bank signing a 9%, 3-month note on September 1. Principal and interest are payable to the bank on December 1. If the company prepares monthly financial statements, the adjusting entry that the company should make for interest on September 30, would be



Debit Interest Expense, $1,350; Credit Interest Payable, $1,350.



Debit Interest Expense, $112.50; Credit Interest Payable, $112.50.



Debit Notes Payable, $1,350; Credit Cash, $1,350.



Debit Cash, $337.50; Credit Interest Payable, $337.50.

Explanation / Answer

Debit Notes Payable, $1,350; Credit Cash, $1,350.

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