What Is the Adjusting Entry to Record Interest for Elegant

question 34

Multiple Choice

What is the adjusting entry to record interest for Elegant Company (the debtor) as of December 31 if Pristine Company (the holder of the note) receives a $29,000, 90-day, 12% note on December 10th from Elegant Company (debtor) ? (Use a 360-day year. Do not round any intermediate calculations. Round your final answer to the nearest dollar.)

• A) Debit to Interest Income of $870; credit to Interest Receivable of $870.
• B) Debit to Interest Payable of $203; credit to Interest Expense of $203.
• C) Debit to Interest Expense of $203; credit to Interest Payable of $203.
• D) Debit to Interest Receivable of $870; credit to Interest Income of $870.

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Definitions:

Control Account

An account used to summarize transactions recorded in subsidiary ledgers for a comprehensive total in the general ledger.

Predetermined Overhead Rate

A calculated rate used to estimate the manufacturing overhead cost per unit of production, based on expected costs and activity levels.

Manufacturing Overhead

Indirect factory-related costs that occur from manufacturing a product such as the cost of managing a factory.

Accumulated Depreciation

The total amount of depreciation expense that has been charged against a fixed asset since it was put into use.