Question

On January 1, Greenbaum Corp. borrows $500,000 cash from First National Bank and issues a 2-year, $500,000 promissory note. Interest of $10,000 is payable semi-annually on June 30 and December 31. On December 31, Greenbaum Corp. should recognize:

a. Interest expense of $10,000
b. Interest payable of $10,000
c. Interest revenue of $10,000
d. Cash payment of $10,000
e. Long-term liability of $500,000

Answer 1

On December 31, Greenbaum Corp. should recognize Interest expense of $10,000.

Step-by-step explanation:

On December 31, Greenbaum Corp. should recognize Interest expense of $10,000.

Interest expense is recognized when a company owes interest payments on a loan or debt. In this case, Greenbaum Corp. borrowed $500,000 cash and issued a 2-year promissory note with semi-annual interest payments of $10,000. Since it is December 31, the end of the year, the interest payment is due and the company should recognize the corresponding expense.