Reference no: EM132774959
Questions -
Q1. On December 1 of Year 1, a company borrowed $50,000 from a bank. The interest rate on the loan is 6%. No cash payments will be made on the loan until November 31 of Year 2.
Which debit or credit is correctly included in the adjusting journal entry necessary on the company's books (the borrower) on December 31 with respect to this loan?
A. Credit to interest expense for $2,750
B. Debit to interest expense for $250
C. Debit to interest expense for $2,750
D. Credit to interest expense for $250
Q2. Here is the end of year account balance information from the accounting records of Jaunty Coffee Company:
Sales revenue: $10,000
Cash: $400
Cost of goods sold: $9,000
Accounts payable: $1,100
Capital stock: $2,000
Dividends: $700
Retained earnings (beginning): $1,000
Inventory: $4,000
Which debit or credit would appear in the closing entries for the year?
A. Credit to inventory for $4,000
B. Credit to cost of goods sold for $9,000
C. Credit to sales revenue for $10,000
D. Debit to dividends for $700
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