Answer:
The account is debited on December 31, 2020: Interest expense by the entry:
Debit Interest expense $24,000
Credit Interest Payable $24,000
Explanation:
Slack Inc. borrowed $400,000 on July 1, 2020. The note requires interest at 12%.
The amount of interest Slack Inc. pays per year = $400,000 x 12% = $48,000
On December 31, 2020, the company has borrowed $400,000 for 6 months. Following the Accrual basis, Slack Inc. would report on December 31, 2020 the interest expense for 6 months:
$48,000/12 x 6 = $24,000
The adjustment entry:
Debit Interest expense $24,000
Credit Interest Payable $24,000
