On October 1, 2021, Hurricane lends $9,000 to another company. The other company signs a note indicating principal and 12% interest will be paid to Hurricane on September 30, 2022. Record the adjusting entry for interest at its year-end of December 31.

The adjusting entry for interest at its year-end of December 31:

Debit Interest expense $270

Credit Interest Payable $270

Explanation:

Hurricane lends $9,000 to another company with the rate of interest of 12%.

The amount Interest expense Hurricane has to pay after 1 year:

$9,000 x 12% = $1,080

The amount Interest expense Hurricane records at December 31, 2021:

$1,080/12 x 3 = $270

The adjusting entry for interest at its year-end of December 31:

Debit Interest expense $270

Credit Interest Payable $270