Question

Wisconsin Bank lends Local Furniture Company $110,000 on November 1. Local Furniture Company signs a $110,000, 6%, 4-month note. The fiscal year end of Local Furniture Company is December 31. The journal entry made by Local Furniture Company on December 31 is:
A.) debit interest payable and credit cash for $1,200
b.) debit interest expense and credit payable for $1,200
c.)Debit interest expense and credit cash for $1,200
d.)Debit interest payable and credit interest expense for $1,200

Answer 1

Answer:

debit interest expense and credit payable for $1,100

Explanation:

The journal entry is shown below:

Interest expense $1,100

             To Interest payable $1,100

(Being the interest expense is recorded)

The computation is shown below:

= $110,000 × 6% × 2 months ÷ 12 months

= $1,100

The 2 months is calculated from November 1 to December 31

This is the answer but the same is not provided in the given options