On March 1, 2021, Bearcat lends an employee $16,000. The employee signs a note requiring principal and interest at 12% to be paid on February 28, 2022. Record the adjusting entry for interest at its year-end of December 31.

Given that,

Amount of money lend to employees on March 1, 2021 = $16,000

Rate of interest = 12 percent

Interest amount and principal to be paid on February 28, 2022.

Interest is accrued on December 31,

Time period = From March 1, 2021 to December 31, 2021

= 10 months

Accrued Interest amount = Principal amount * Interest rate * Time period

= $16,000 * 0.12 * (10 : 12)

= $1,600

Therefore, the adjusting journal entry is as follows:

Interest receivable A/c Dr. $1,600

To interest income $1,600

(To record the interest on amount given to employees is accrued and adjusted)