On December 31, 2022, ABC Company accrues interest payable of \$4,500 for its bonds. What is the journal entry on December 31, and what is the entry on January 1, 2023, when the interest is paid?

• A. December 31: Debit Interest Expense \$4,500, Credit Cash \$4,500; January 1: Debit Interest Payable \$4,500, Credit Interest Expense \$4,500.
• B. December 31: Debit Interest Expense \$4,500, Credit Interest Payable \$4,500; January 1: Debit Interest Payable \$4,500, Credit Cash \$4,500.
• C. December 31: Debit Interest Payable \$4,500, Credit Interest Expense \$4,500; January 1: Debit Cash \$4,500, Credit Interest Payable \$4,500.
• D. December 31: Debit Cash \$4,500, Credit Interest Expense \$4,500; January 1: Debit Interest Expense \$4,500, Credit Interest Payable \$4,500.

Answer: (B)