Answer:
Debit Interest expense by $1,000 & Credit Interest payable by $1,000
Explanation:
The adjusting entries for the four months passed on borrowed money will be to Debit the <em>Interest expense</em> and Credit the <em>Interest Payable.</em>
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The interest expense for the four months passed on bonds will be calculated as follows:
Yearly Interest expense = Value of bond x The rate = $<em>50,000 x 6%</em>
Yearly Interest expense = $3,000
The interest expense for 4 months = (4/12) x $3,000 = $1,000
Hence, following adjusting entry will be made for the passed 4 months on borrowed money:
Debit Interest expense $1,000
Credit Interest payable $1,000