Answer:
The correct answer is Option B.
Explanation:
Note receivable is a promissory note with a written promise made by the borrower to the lender (payee) to pay a certain, definite sum at a specified date.
The interest expense on the notes is calculated as: Principal x Interest Rate x Time
In this case, the total interest expense is $5,000 x 12%/12 x 1.5 months = $75.
Therefor, total debit to interest expense is $75.
Answer:
The correct answer is D)
Explanation:
The amount borrowed is an expense to Sawyer Co. Therefore it has to be recorded as a credit transaction in their Interest Expense Account by the interest on the $5,000 that was borrowed.
The interest on the $5,000 is calculated by apply the rate (12%) on $5,000.
= 5000(12/100)
= 50*12
= $600
The actual amount is gotten by dividing the interest by 12 months and multiplying by a month and a half (45 days) assuming that a month is 30 days.
= (600/12)1.5
= $50 * 1.5
= $75
The principle of double-entry in accounting states that you must always credit any increase in liability and debit a decrease in an amount due to another.
Cheers!
