Nevada Company signed a $360,000, 90-day, 9% note payable, on December 1, 2016.

Question

Nevada Company signed a $360,000, 90-day, 9% note payable, on December 1, 2016. If the accounting period ends on December 31, 2016, the entry made on the note’s maturity (March 1, 2017) will include: 0000 T-Mobile LTE 9:48 AM Touch to return to Navigation Chapter 10 Quiz QUESTION 13 Not yet answered 1.00 P Flag question Points out of Nevada Company signed a $360,000, 90-day 996 note payable, on December 1, 2016, if the accounting period ends on December 31, 2016, the entry made on the note's maturity (March 1, 2017) will include: Select one: A. A debit to Interest Payable for $5,400 B. A debit to Interest Expense for $5,400 c. A debit to Interest Expense for $2,700 D. A debit to Interest Expense for $8,100

Explanation / Answer

Answer: Option B. A debit to Interest Expense for $5,400

Explanation: On maturity of the note, the entry recorded will be debit to Note Payable $360,000; debit to Interest Payable $2,700 ($360,000 x 9% x 1/12); debit to Interest Expense $5,400 ($360000 x 9% x 2/12) and credit to cash $368,100. Hence, option B. is the correct answer.

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