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(Solution document) AAA Company has a December 31 year end. On January 1, 2016, AAA Company took out a $50,000 bank loan. The loan has an interest rate of 10% annually.


AAA Company has a December 31 year end. On January 1, 2016, AAA Company took out a $50,000 bank loan. The loan has an interest rate of 10% annually. The loan and the interest will be paid at the end of five years. What adjusting entry is necessary on December 31, 2016?

Select one:

a. Debit Interest expense $5,000; Credit Interest payable $5,000

b. Debit Interest expense $5,000; Credit Bank Loan payable $5,000

c. Debit Bank Loan payable $5,000; Credit Cash $5,000

d. No entry is required

 







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