JacksonJackson Bank lends JabbourJabbour Clothing Company $125 comma 000125,000 on September 1. JabbourJabbour signs a $125 comma 000125,000 , 6%, six-month note. The journal entry made by JabbourJabbour on December 31, its fiscal year-end, is

The journal entry is shown below:

Interest expense A/c Dr $3,000

To Interest payable A/c $3,000

(Being interest is recorded)

The computation of the interest expense is shown below:

= Principal * rate of interest * number of months : total number of months in a year

= $125,000 * 6% * (4 months : 12 months)

= $2,500

The four-month is calculated from the September 1 to December 31