Question

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. Prepared the general journal adjusting entry (without explanation) needed for December 31, 20X1. If no entry is required then write "No Entry Required."

Answer 1

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