Travis County Bank Agrees to Lend Backyard Corporation $200,000 on January

question 39

Multiple Choice

Travis County Bank agrees to lend Backyard Corporation $200,000 on January 1.Backyard signs a $200,000,4%,9-month note.Interest is due at maturity on September 30. What adjusting entry did Backyard make on June 30 before preparing its financial statements?

• A)Debit interest expense $4,000; Credit interest payable $4,000
• B)Debit interest expense $4,000; Credit cash $4,000
• C)Debit interest payable $4,000; Credit cash $4,000
• D)Debit interest payable $4,000; Credit interest expense $4,000 ½ of the annual interest must be accrued at June 30.

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Definitions:

Acquisition

The process of acquiring control over another company, either through the purchase of its shares or assets.

Intragroup Transaction

Transactions that occur between two entities within the same group of companies, often needing elimination during consolidation for accurate financial reporting.

NCI Adjustment

Adjustments made to reflect the share of earnings or losses attributable to non-controlling interests in a subsidiary.

Tax Rate

is the percentage at which an individual or corporation is taxed by the government on their income or profit.