Answer:
The general journal adjusting entry needed for December 31, 20X1:
Debit Interest expense $2,600
Credit Interest Payable $2,600
Explanation:
On January 1, 20X1, Bravo Company borrowed $26,000 to purchase equipment. The loan is to be repaid plus interest of 10% per year, on December 31, 20X2.
The amount of interest expense for 1 year = $26,000 x 10% = $2,600
Following the Accrual accounting - an accounting method that revenue or expenses are recorded when a transaction occurs rather than when payment is received or made. The company should record interest expense for the year 20X1 by the general journal adjusting entry:
Debit Interest expense $2,600
Credit Interest Payable $2,600
