Question

On September 1, 2021, Daylight Donuts signed a $160,000, 10%, 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 Choice Debit Interest Expense, $8,000. Debit Interest Expense, $5,333. Debit Interest Payable, $2,667. Debit Interest Expense, $2,667.

Answer 1

Account Titles and Explanation Debit Credit Date 31-12-2021 Interest expense ($160,000*10%*4/12) $5,333 Interest payable (To record the accrued interest) $ 5,333 01-03-2022 Notes payable $160,000 Interest expense ($160,000*10%*2/12) $ 2,667 $5,333 Interest payable $ 168,000 Cash (To record the payment of note) Hence, the correct option is: Debit interest expense $2,667.