A Company Pays $9,000 in Interest on Notes Consisting of $6,000

question 102

Multiple Choice

A company pays $9,000 in interest on notes consisting of $6,000 of interest that was accrued during the last accounting period and $3,000 of interest that accumulated during the current accounting period but has not yet been accrued on the books.The journal entry for the interest payment should include a:

• A)debit to Interest Expense for $9,000 and a credit to Cash for $9,000.
• B)debit to Cash for $9,000 and a credit to Interest Payable for $9,000.
• C)debit to Interest Expense for $3,000,a debit to Interest Payable for $6,000,and a credit to Cash for $9,000.
• D)debit to Interest Payable for $6,000,a debit to Accrued Interest for $3,000,and a credit to Cash for $9,000.

---

Definitions:

Time Value

The viewpoint that money on hand today is considered more valuable than the same amount received in the future, due to potential earnings.

Money

A medium of exchange that facilitates trade, acting as a unit of account, a store of value, and sometimes, a standard of deferred payment.

Present Value Factors

Multipliers used in calculating the present value of a future cash flow, taking into account the time value of money and interest rates.

Future Value Factors

Future value factors are quantitative measures used in calculating the future value of an investment based on its present value, interest rate, and time period.