The Edgartown Company Borrowed $480,000 on December 1,2014

question 17

Multiple Choice

The Edgartown Company borrowed $480,000 on December 1,2014.The note,which is due in 60 days,included interest at 8%.The company's fiscal year ends on December 31.How would the company record the adjusting entry relating to this note at December 31,2014?

• A)Debit Interest Expense for $38,400 and credit Interest Payable for $38,400.
• B)Debit Interest Expense for $6,400 and credit Interest Payable for $6,400.
• C)Debit Interest Expense for $3,200 and credit Interest Payable for $3,200.
• D)Debit Notes Payable for $483,200 and credit Cash for $483,200.
• E)Debit Interest Expense for $3,200 and credit Cash for $3,200.

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Definitions:

RRSP

Registered Retirement Savings Plan, a Canadian account for holding savings and investment assets, aimed at retirement planning with tax benefits.

Compounded Monthly

Interest calculation method where interest is added to the principal every month, affecting the total interest earned or paid.

Interest Costs

The total cost incurred by borrowing funds, expressed as the interest rate multiplied by the principal over a given period.

Percentage Discount

A percentage discount refers to a reduction in price on goods or services based on a specified percentage of the original price.