Watunga county bank agrees to lend Hoffman Granite Company $600,000 on January 1
ID: 2431873 • Letter: W
Question
Watunga county bank agrees to lend Hoffman Granite Company $600,000 on January 1. Hoffman Granite Company signs a $600,000, 8%, 9-month note. What is the adjusting entry requited if Hoffman Granite Company prepares financial statements on June 30th?
A) interest expense...........24,000
interest payable..................................24,000
B) interest expense...........24,000
cash.................................................24,000
C) interest payable...........24,000
cash..................................................24,000
D) interest payable...........24,000
interest expense................................24,000
Explanation / Answer
The Answer is “Option A”
Date
Accounts Tittles and Explanations
Debit ($)
Credit ($)
June 30th
Interest Expenses A/c
24,000
To Interest Payable A/c
24,000
Total Amount of Note = $600,000
Total Interest Amount on Note = $600,000 x 8% = $48,000
Total Interest Expense Payable for the first 6 months ended June 30th
= $48,000 x 6/12
= $24,000
Date
Accounts Tittles and Explanations
Debit ($)
Credit ($)
June 30th
Interest Expenses A/c
24,000
To Interest Payable A/c
24,000
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