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Which of the following statements is correct regarding the adjusting entry to record interest accrued on a note payable?

a. Interest on the note payable is classified as an expense since it is a cost of borrowing.
b. Interest on a note payable should be credited to Notes Payable because it increases the amount of principal to be repaid at the maturity of the note.
c. Interest on the note payable is classified as revenue since it is an amount that can be earned on investments.
d. Interest on the note payable will not accumulate because it is paid at the end of each year.

Sagot :

Zvikoidn

Answer:

b. Interest on a note payable should be credited to Notes Payable because it increases the amount of principal to be repaid at the maturity of the note.

Explanation:

Interest accrued on a note payable journal entry :

Debit  : Interest Payable

Credit : Note Payable

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