Johnson Issues a $3,000, 5%, 100-Day Promissory Note to Adam

Johnson issues a $3,000, 5%, 100-day promissory note to Adam on November 1. What is the adjusting entry made by Johnson on December 31 to recognize the interest (using a 360-day year) ? (Do not round any intermediate calculations. Round your final answer to the nearest cent.)

A) Debit Interest Expense; credit Interest Payable for $25.00
B) Debit Interest Expense; credit Interest Payable for $12.50
C) Debit Interest Receivable; credit Interest Income for $25.00
D) Debit Interest Receivable; credit Interest Income for $12.50

Correct Answer:

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