On May 1, 2021, Townsley borrowed $250,000 from Prime Bank by signing a three-year, 6% note payable

On May 1, 2021, Townsley borrowed $250,000 from Prime Bank by signing a three-year, 6% note payable. Interest is due each May 1. What adjusting entry, if any, should Prime Bank record on December 31, 2021?

A) Debit Interest Receivable and credit Interest Revenue for $5,000.

B) Debit Interest Receivable and credit Interest Revenue for $10,000.

C) Debit Interest Receivable and credit Interest Revenue for $15,000.

D) No adjusting entry is necessary.

Answer: B

Allen Inc. took out a one-year, 8%, $100,000 loan on March 31, 2021. Interest is due upon maturity of the loan. What adjusting entry, if any, should Allen Inc. record on December 31, 2021?

A) Debit Interest Expense and credit Interest Payable for $6,000.

B) Debit Interest Expense and credit Interest Payable for $2,000.

C) No adjusting entry is necessary.

D) Debit Interest Expense and credit Interest Payable for $8,000.

Answer: A

Which of the following is a possible adjusting entry?

A) Debit Cash, credit Accounts Payable.

B) Debit Service Revenue, credit Cash.

C) Debit Salaries Expense, credit Salaries Payable.

D) Debit Utilities Expense, credit Retained Earnings.

Answer: C