Question

On November 1, Wright Co. borrowed $20,000 cash from Third Bank by signing a 90-day, 6% interest-bearing note.

Answer 1

On January 30, the due date of the note, Wright will record the payment with a debit to Interest Expense in the amount of $100.

Explanation:

• On November 1, Wright Co. borrowed $20,000 cash from the Third Bank by signing a 90-day, and 6% of interest-bearing note.

• On December 31, it was recorded an adjusting entry to interest expense of $200.
• On January 30, which is the due date of the note, Wright will record the payment with a debit to Interest Expense in the amount of $100.
• Interest expense is an expense which is known as a non-operating expense which is shown on the income statement. It also represents interest payable amount when it is borrowed. For Example,
• bonds,convertible debt, loans or lines of credit
• The main difference between the interest expense and the interest paid is that the discount amount and this difference changes the net amount of bond liability.
• Interest expense is an amount determined by the interest rate on an account.