The correct adjusting entry for New Morning Bakery on December 31, 2024, is A) Debit Interest Expense, $5,880; Credit Interest Payable, $5,880. This entry recognizes the accrued interest expense on the $196,000, 6%, six-month note payable, ensuring accurate financial reporting by acknowledging the interest liability at the end of the accounting period.
The correct adjusting entry for New Morning Bakery on December 31, 2024, for the $196,000, 6%, six-month note payable with the amount borrowed plus accrued interest due on May 1, 2025, is A) Debit Interest Expense, $5,880; Credit Interest Payable, $5,880.
This entry reflects the interest expense accrued at the end of the accounting period and recognizes the liability in the form of interest payable, ensuring accurate financial reporting in accordance with accrual accounting principles.
The interest expense is calculated as $196,000 * 6% * (2/12) for the two months of accrual from November 1 to December 31.
Complete question should be :
What adjusting entry should New Morning Bakery record on December 31, 2024, for a $196,000, 6%, six-month note payable with the amount borrowed plus accrued interest due on May 1, 2025?
A) Debit Interest Expense, $5,880; Credit Interest Payable, $5,880.
B) Debit Interest Payable, $5,880; Credit Interest Expense, $5,880.
C) Debit Interest Expense, $11,760; Credit Interest Payable, $11,760.
D) Debit Interest Payable, $11,760; Credit Interest Expense, $11,760.