Kangaroo Company signed a three-month, 8% note on November 1, 2016, for the purchase of $240,000...
Question:
Kangaroo Company signed a three-month, 8% note on November 1, 2016, for the purchase of $240,000 of inventory. Assuming the company's accounting period ends on December 31, which one of the following statements is not correct?
a. On February 1, 2017, the company will debit Interest Expense for $3,200.
b. On December 31, 2016, the company will debit Interest Expense for $3,200.
c. On February 1, 2017, the company will debit Interest Payable for $3,200.
d. On December 31, 2016, the company will credit Interest Payable for $3,200.
Note Payable:
A note payable is a formal liability that usually includes requirements to pay interest on the principal. Notes payable, as with other borrowed amounts, may require adjusting entries to record interest costs.
Answer and Explanation: 1
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View this answerIt is not true that a) on February 1, 2017, the company will debit Interest Expense for $3,200.
On February 1, 2017, the company will debit the note...
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Accounting for Non-Interest & Interest-Bearing Notes
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Chapter 4 / Lesson 7
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Discover how to account for both non-interest and interest-bearing notes. Examine a dilemma presented in an example, explore a detailed overview of both interest-bearing and non-interest-bearing notes, and see how to put it all together.
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