Final answer:
The correct year-end adjusting entry for the company would be to accrue interest expense for the 9-month period from September 1 to December 31.
Step-by-step explanation:
The correct year-end adjusting entry for the company would be to accrue interest expense for the 9-month period from September 1 to December 31. Since the note is for $200,000 and has an 8% annual interest rate, the interest expense for 9 months would be calculated as follows:
Interest Expense = Principal Amount x Interest Rate x Time Period
Interest Expense = $200,000 x 0.08 x (9/12)
Interest Expense = $12,000
The adjusting entry would be:
- Debit Interest Expense: $12,000
- Credit Interest Payable: $12,000