Question

On January 1, 2021, Morris Enterprises issued 9%, 5-year bonds with a face amount of $900,000 at par. Interest is payable annually on January 1. Prepare the entries to record the issuance of the bonds and the first annual interest accrual on December 31

Answer 1

Dec 31

Dr Interest expense $72,000

Cr Interest Payable $72,000

($900,000*9%)

(Being to record the first year interest expense accrued)

What is Interest Payable?

Interest Payable is a liability account, shown on a company's balance sheet, which represents the amount of interest expense that has accrued to date but has not been paid as of the date on the balance sheet.

In short, it represents the amount of interest currently owed to lenders.

Is interest payable an asset?

Interest payable is a liability, and is usually found within the current liabilities section of the balance sheet.

Learn more about interest payable here:

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