Question

A company borrowed $100,000 at 6% interest on september 1, 2022. assuming adjusting entries have not been made during the year, the entry to record interest accrued on december 31, 2022 would include a debit to interest expense and a credit to interest payable for $2,000. group startstrue or false

Answer 1

The statement that a debit to Interest Expense and a credit to Interest Payable for $2,000 is required to record the interest accrued on a $100,000 loan at 6% annual interest for 4 months is true.

Step-by-step explanation:

The statement is true. The company borrowed $100,000 at a 6% annual interest rate on September 1, 2022. To find the accrued interest on December 31, 2022, we calculate the interest for 4 months (September to December). The interest for one year would be 100,000 * 0.06 = $6,000; therefore, the interest for 4 months is (4/12) * $6,000 = $2,000. The journal entry to record the accrued interest would indeed require a debit to Interest Expense and a credit to Interest Payable for $2,000.