What Would Be the Adjusting Entry for a Note Payable

question 147

Multiple Choice

What would be the adjusting entry for a note payable whose interest is not included in the face amount of the note?

• A)Debit Interest Receivable and credit Interest Income.
• B)Debit Interest Expense and credit Cash.
• C)Debit Interest Expense and credit Interest Payable.
• D)Debit Cash and credit Notes Payable.

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Definitions:

Variable Overhead Costs

Indirect costs of production that fluctuate with the level of output, such as utilities and indirect labor.

Budgeted Overhead Cost

The estimated costs associated with running a company that are not directly tied to a specific product or service, including rent and utilities.

Machine-Hours

A measure of production time, representing the total hours that machines are in operation during a specific period.

Spending Variance

The difference between the actual amount spent on a particular item and the amount that was budgeted for it.