Question

A company pays $18,000 in interest on notes, consisting of $12,000 interest that was accrued during the last accounting period and $6,000 of interest that accumulated during the current accounting period but has not yet been accrued on the books. The journal entry for the interest payment should:

A) debit Interest Expense for $18,000 and credit Cash for $18,000.

B) debit Cash for $18,000 and credit Interest Payable for $18,000.

C) debit Interest Expense for $6,000, debit Interest Payable $12,000 and credit Cash for $18,000.

D) debit Interest Payable for $12,000, debit Accrued Interest $6,000 and credit Cash for $18,000.

Answer

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