To determine which entry Jackson Company must make on September 30 to record the accrued interest on the mortgage, we need to calculate the interest that has accrued over the month of September. Let's break the problem down step by step:
1. Identify the principal amount of the mortgage:
- Principal of the mortgage: \[tex]$960,000
2. Understand the terms and rate of the mortgage:
- Annual interest rate: 9%
- Interest is payable quarterly on August 31, November 30, February 28, and May 31.
3. Calculate the quarterly interest:
- Since the interest rate is per annum and interest is payable quarterly, we need to calculate the interest for one quarter (3 months).
- The quarterly interest rate is 9% / 4 = 2.25%.
- Quarterly interest = Principal × Quarterly interest rate
- Quarterly interest = \$[/tex]960,000 × 2.25% = \[tex]$960,000 × 0.0225 = \$[/tex]21,600.
4. Calculate the monthly interest:
- Since we need to account for the interest accrued for one month (September), we divide the quarterly interest by 3.
- Monthly interest = Quarterly interest / 3.
- Monthly interest = \[tex]$21,600 / 3 = \$[/tex]7,200.
5. Record the appropriate journal entry:
- Since the interest for September is an expense that has accrued but not yet paid, we need to record it as Interest Expense and Interest Payable.
- The correct journal entry on September 30 would be to debit Interest Expense and credit Interest Payable for the interest accrued in September.
Hence, the correct entry Jackson must make on September 30 is:
Choice B:
```
Interest Expense 7,200
Interest Payable 7,200
```
