The edgartown company borrowed $480,000 on december 1, 2014. the note, which is due in 60 days, included interest at 8%. the company's fiscal year ends on december 31. how would the company record the adjusting entry relating to this note at december 31, 2014?

The total interest due at the end of two months is computed by $480,000 * 0.08 * 2/12 = $6400

As the notes payable charge interest each month interest of $6400/2 = $3200 needs to be accrued. So the adjusting entry to be recorded is:

debit to interest expense 3200

credit to interest payable 3200