On October 1, 2015, Attra Inc. borrows $207,000 on a three-year note that requir

Question

On October 1, 2015, Attra Inc. borrows $207,000 on a three-year note that requires the company to pay 12% interest on March 31 and September 30. On December 31, 2015, the adjusting entry to accrue interest on the note should debit:

Interest Expense and credit Interest Payable for $6,210.

Interest Expense and credit Cash for $12,420.

Interest Payable and credit Interest Expense for $6,210.

Interest Expense and credit Interest Payable for $12,420.

On October 1, 2015, Attra Inc. borrows $207,000 on a three-year note that requires the company to pay 12% interest on March 31 and September 30. On December 31, 2015, the adjusting entry to accrue interest on the note should debit:

Explanation / Answer

December 31, 2015 Interest expenses a/c Dr $12420

Interest Payable $12420

( 6% is half yearly interest rate on $207000, interst is accrued)

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