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.

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Definitions:

Double Taxation

A situation where the same income is taxed twice, typically once at the corporate level and again when distributed to shareholders as dividends.

Company Management

The group of individuals responsible for making major decisions, overseeing operations, and managing the resources and strategy of a company.

Capital Budgeting

The process by which a business evaluates and selects long-term investments based on their potential to generate future profit.

Long-Term Investments

Long-term investments are financial assets intended to be held for a period longer than one year, aiming for higher returns over time.