Question

Jones Company has a 90-day, 12% note payable for $6,500 dated December 17 in which interested has accrued. On January 1, after adjusting and closing entries have been posted, what is the appropriate reversing entry?

Answer 1

The appropriate reversing entry for the Jones Company's 90-day, 12% note payable for $6,500 dated December 17 would be to reverse the accrued interest for the month of December.

Step-by-step explanation:

The appropriate reversing entry for the Jones Company's 90-day, 12% note payable for $6,500 dated December 17 would be to reverse the accrued interest for the month of December. Since the note was dated on December 17, it means it was outstanding for only 15 days in December. To calculate the interest for the month of December, we can use the formula:

Interest = Principal x Rate x Time

Interest = $6,500 x 12% x (15/365)

Once the interest expense for December has been reversed, the reversing entry would be:

Debit Interest Expense - December

Credit Accrued Interest Payable - December