The Adjusting Entry to Record Accrued Interest on a Note

question 23

Multiple Choice

The adjusting entry to record accrued interest on a note payable requires a

• A)debit to Interest Income and a credit to Notes Payable.
• B)debit to Interest Expense and a credit to Interest Payable.
• C)debit to Interest Payable and a credit to Interest Expense.
• D)debit to Interest Expense and a credit to Cash.

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Definitions:

Income Tax

Taxes levied by the government on the income generated by businesses and individuals.

Stockholders

Individuals or entities that own shares in a corporation, also commonly referred to as shareholders.

Borrowed Money

Funds that are obtained through loans or credits, which must be repaid with interest.

Financing Activities

Transactions and events that affect the long-term liabilities and equity of a company, including issuing debt, issuing equity, and paying dividends.