On December 31, 2023, XYZ Company accrues interest payable of \$3,000 for its bonds. What is the journal entry on December 31, and what is the entry on January 1, 2024, when the interest is paid?

• A. December 31: Debit Interest Payable \$3,000, Credit Interest Expense \$3,000; January 1: Debit Cash \$3,000, Credit Interest Payable \$3,000.
• B. December 31: Debit Interest Expense \$3,000, Credit Interest Payable \$3,000; January 1: Debit Interest Payable \$3,000, Credit Cash \$3,000.
• C. December 31: Debit Cash \$3,000, Credit Interest Expense \$3,000; January 1: Debit Interest Expense \$3,000, Credit Interest Payable \$3,000.
• D. December 31: Debit Interest Expense \$3,000, Credit Cash \$3,000; January 1: Debit Interest Payable \$3,000, Credit Interest Expense \$3,000.

Answer: (B)