On september 1, abc company borrowed $50,000 on a 6%, 9 month note payable to xyz national bank. given no previous adjusting entries have been recorded, abc's adjusting entry four months later at december 31 would include a:

Question

Business

Guest

25 June, 11:36

On september 1, abc company borrowed $50,000 on a 6%, 9 month note payable to xyz national bank. given no previous adjusting entries have been recorded, abc's adjusting entry four months later at december 31 would include a:

+5

Answers (1)

Know the Answer?

Jair · Answer 1

To determine the answer to this, let us first determine the interest using the formula:

Interest = Principal amount * Interest rate * Number of months / 12

September to December would be 4 months, therefore:

Interest = $50,000 * 0.06 * 4/12

Interest = $1,000

Therefore the adjusting entry should be:

debit to Interest Expense of $1,000