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On November 1, Mcgonagall borrowed from Dumbledore, giving him a $12,000, 3 month, 9% note, interest payable at maturity. Mcgonagall made no entry after November 1.
On December 31, the end of the accounting period, what entry would Mcgonagall make?
A. Interest Payable 180
Interest Expense 180
B. Interest Expense 180
Interest Payable 180
C. Interest Expense 180
Cash 180
D. Interest Payable 180
Discount on Notes Payable 180

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Answer:

B) Interest Expense 180

Interest Payable 180

Explanation:

Based on the information given we were told that On November 1, Mcgonagall borrowed from Dumbledore which includes the amount of $12,000, as well as 3 month, and 9% note in a situation where the interest is payable at maturity and Mcgonagall made no entry after November 1 which means that On December 31, which is the end of the accounting period the Journal entry that Mcgonagall would make will be :

Dr Interest Expense 180

Cr Interest Payable 180

($12,000 x 9% x 2/12 )

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