Question

The following unadjusted accounts are taken from the records of Brown Corp. at December 31, 2019:

Bank Loan 201 Interest Expense 632 Interest Payable 222 12,000 200 100
Additional Information: The bank loan bears interest at 6% per year. It was obtained on April 1, 2019.
Payment in full is due on March 31, 2020.
Required: Prepare the adjusting entry at December 31, 2019

Answer 1

Dr Interest expense $340

Cr Interest payable $340

Step-by-step explanation:

Preparation of the adjusting entry at December 31, 2019

First step is to calculate the interest expense to be debited

Interest expense for 2019 $540

(12,000*6%*9/12)

Less Interest expense already debited ($200)

Interest expense to be debited $340

($540-$200)

Now let Prepare the journal entry

December 31, 2019

Dr Interest expense $340

Cr Interest payable $340

($540-$200)

(Being Interest expense recorded)