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Joyce's Gift signs a three-month note payable to help finance increase in inventory for the Christmas Shopping season. The note is signed on Nov 1 in the amount of $50k with annual interest 12%. What is the adjusting entry to be made on Dec 31 for the interest expense accrued to that date, if no entries have been made previously for the interest?

Respuesta :

Answer: The answer is as follows:

Explanation:

Joyce's Gift signs a three-month note

period expired = 2 months

Note is signed on Nov 1 in the amount of $50k with annual interest 12%

Interest = [tex]50000 \times \frac{12}{100} \times \frac{2}{12}[/tex]

= $1000

Therefore, the Journal entry for this adjustment is as follows:

Interest Expense A/C              1000

To Interest Payable A/C                           1000

(adjusting entry to be made on Dec 31 for the interest expense accrued to that date)

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