Answer:
Mama's Pizza Shoppe
Adjusting Entry on June 30, 2021:
Debit Interest Expense $144
Credit Interest Payable $144
To accrue interest expense for the year (2 months).
Step-by-step explanation:
a) Calculation: The interest on the borrowing is $144 ($7,200 x 12%)/12 x 2
b) Adjusting entries are prepared at the end of the accounting period in order to recognize non-cash expenses and revenue, prepaid expenses, and revenue received in advance, and depreciation expense for the period. It is in accordance with the accrual concept and matching principle of generally accepted accounting principles. These require that expenses and revenue are recognized on the accrual basis whether cash is paid or received for them or not. And that expenses and revenue are matched to the period they occur.