Multiple Choice Question 141 Uncle Tupelo\'s Gifts signs a three-month note paya

Question

Multiple Choice Question 141 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 $76600 with annual interest of 12%, what is the adyrting entry to be made on December 31 for the interest expense accrued to that date, a no entries have been mede prevoey for the interest? O Interest Expense 1532 Interest Payable 1532 1532 2298 532 532 Cash O Interest Expense 2298 Snterest Payable Interest Expense 1532 Notes Payable

Explanation / Answer

Interest expense = Principal outstanding * rate of interest * proportionate period

Interest expense = 76600 * 12% * 2/12 = 1,532

Entry is:

Entry for accrued interest

Account Debit Credit Interest expense 1532 Interest payable 1532

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