Question
Prince Charming Company borrows $100,000 from the bank on April 1, 2015. This loan is in the form of a note that is due in
Prince Charming Company borrows $100,000 from the bank on April 1, 2015. This loan is in the form of a note that is due in one year (March 31, 2016). The annual interest rate is 10%, and interest is paid on September 30, 2015 and on March 31, 2016 (due date). The fiscal year end for Prince Charming is 12/31. What balance should be recorded for interest expense at March 31, 2016 assuming the earlier adjusting journal entries have been recorded correctly?
This is the correct work:
I don't understand since it says "interest is paid on September 30, 2015 and on March 31, 2016" why the entries wouldn't be this:
9/30 Interest expense $5000
Cash $5000
3/31 Interest expense $5000
Cash $5000
Please explain all steps and reasoning!
9/30 5,000 Interest expense Cash 5,000 2,500 12/31 Interest expense 2,500 Interest payable 3/31 Interest expense Interest es 2,500 Interest payable 2,500 Cash 2 500 5.000Step by Step Solution
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