Question

Saturn, Inc. signed a oneminusyear $ 36,000 note payable at 8​% interest on March​ 1, 2017. How much interest expense must be accrued on May​ 31, 2017?​ (Round any intermediate calculations to two decimal​ places, and your final answer to the nearest whole​ number

Answer 1

May 31 2017 Interest expense 720 Dr

Interest Payable 720 Cr

Interest expense of 720 is accrued on May 31 2017.

Step-by-step explanation:

The notes provides 8% interest rate which is the annual interest rate. The total interest on the one year note is 36000 * 0.08 = 2880 which is payable at the end of the term when the note payable is due. However, if the company prepares adjusting entry on a monthly basis or at the end of the period, it will record the interest expense that relates to that period and accrue it.

Till may 31 2017, 3 months have passes and the interest for 3 months is accrued which comes out to be 2880 * 3/12 = $720