Sheffield Corporation borrowed $46,400 from the bank signing a 6% 3 month note o

Question

Sheffield Corporation borrowed $46,400 from the bank signing a 6% 3 month note on September 1st principle and interest are payable to the bank on December 1st if the company prepares monthly financial statements the adjustment that the company should make for interest on September 30th would be

a and increase interest expense $232 increase interest payable $232

b a decreased note payable 2784 decreased cash 2784

c increased cash $696 increased interest payable $696 or

D increase interest expense 2784 and increase interest payable 2784

Explanation / Answer

46400 * 6% = 2784

for 3 months 2784 * ( 3 /12) = 696 is the 3 months interest

so we have to find for sep 30

696 / 3 = 232 this is one month amount

so answer is a

a and increase interest expense $232 increase interest payable $232

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