Question

On december 1, milton company borrowed $500,000, at 9% annual interest, from the tennessee national bank. Interest is paid when the loan matures one year from the issue date. What is the adjusting entry for accruing interest that milton would need to make on december 31, the calendar year-end?

Answer 1

Explanation:gg

Answer 2

Adjusting entry for the Interest Payable:

It is given that on December 1, Milton company borrowed $500,000, at 9% annual interest. The Interest is paid when the loan matures one year from the issue date.

It means we need to make adjustment for the interest expense and interest payable for the month of December. The interest for one month shall be (500,000*9%/12) = $3,750

The adjusting entry for accruing interest that Milton would need to make on December 31, the calendar year-end shall be as follows:

Interest Expense Debit $3,750

Interest Payable Credit $3,750