Question

On September 1, 2021, Daylight Donuts signed a $170,000, 8%, six-month note payable with the amount borrowed plus accrued interest due six months later on March 1, 2022. Daylight Donuts records the appropriate adjusting entry for the note on December 31,2021. In recording the payment of the note plus accrued interest at maturity on March 1, 2022, Daylight Donuts would: (Do not round your intermediate calculations.) Multiple Cholce A) Debit Interest Expense, $2,267. B) Debit Interest Payable, $2.267 C) Debit Interest Expense, $4,533 D) Debit Interest Expense, $6,800

Answer 1

Answer:

D) Debit Interest Expense 6,800

Explanation:

To calculate Daylight Donuts' accrued interest at maturity on March 1, 2022 we can use the following formula:

interest expense = amount note payable x interest rate x (months / 12)

interest expense = $170,000 x 8% x (6 / 12) = $170,000 x 8% x 0.5 =$6,800