Question

The company has a bank loan and has incurred (but not recorded) interest expense of $3,500 for the year ended December 31, 2018. The company must pay the interest on January 2, 2019.

Answer 1

The journal entry to record accrued interests:

December 31, 2018, accrued interests on bank loan

Dr Interest expense 3,500

Cr Interest payable 3,500

The journal entry to record the interest payment:

January 2, 2019, accrued interests paid

Dr Interest payable 3,500

Cr Cash 3,500