Answered: Bill's Barber shop signed a one-year 7%…

Bill's Barber shop signed a one-year 7% bak loan payable in the amount of 5,000 on April 1, 2022.Interest is due at maturity

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

Cost of Credit

The cost of credit is an extra amount that the borrower has to pay besides the loan amount. These credit charges may vary from loan to loan. The cost of credit includes interest charges, maintenance charges, and arrangement charges. Some of the costs are mandatorily collected by the lender based on the loan amount and tenure of the loan. The cost of credit is also called finance charges of the credit.

Question

Bill's Barber shop signed a one-year 7% bak loan payable in the amount of 5,000 on April 1, 2022.Interest is due at maturity.The adjusting journal entry on December 31, 2022, assuming adjusting entries were not previously made, would consist of

Bill's Barber Shop signed a one-year 7% bank loan payable in the amount of $5,000 on April 1, 2022. Interest is due at maturity. The
adjusting journal entry on December 31, 2022, assuming adjusting entries were not previously made, would consist of
O a debit to Interest Expense for $263 and a credit to Interest Payable for $263.
O a debit to Bank Loan Payable for $208 and a credit to Interest Payable for $208.
O a debit to Interest Expense for $350 and a credit to Interest Payable for $350.
O a debit to Interest Expense for $208 and a credit to Bank Loan Payable for $208.
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Definition Definition Method of recording financial transactions in the book of original entry by debiting and crediting the accounts affected by a transaction using the golden rules of accrual accounting.

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