Answer:
Option A and B
Explanation:
The entry on 1 March would be:
Dr Interest Expense $100 .......... $10,000 * 6% * 2/12
Dr Notes Payable $10,000
Cr Cash Account $10,100
The above entry shows that the debit entry is option A and B.
When the liability is paid off the entry is debit to liabilities with the amount paid which means the option A is also correct.
The interest expense of 1 month which is $50 ($10,000 * 6% * 1/12) has been already recognized which means the remainder 2 month expense must be recognized which is $100 ($10,000 * 6% * 2/12). Hence option B is also correct.
Answer:
A. Debit Notes Payable $10,000
B. Debit Interest Expense $100
C. Debit Interest Payable $50
Explanation:
A liability was recorded at the time of issuance as below
Dr. Cash $10,000
Cr. Note Payable $10,000
So, on March 1 the Note Payable account will be debited.
Interest was also accrued on December 31, as below
Dr. Interest Expense $50
Cr. Interest Payable $50
So, on March 1 the Interest Payable account will be debited.
On March 31, Interest of 2 months is also accrued and expense will be recorded with the payment of Note as a debit entry to interest expense account.
