Question

20. A company is in its first month of operations. On January 1, the company borrows $10,000 from the bank. The bank charges annual interest of 12% on the borrowed amount. Interest is due at the end of the year. What adjusting entry would be made at the end of January? Post the adjusting entry for the scenario provided. Record the annual interest of 12% payable at the end of the year on the $10,000 borrowings from the bank.

Answer 1

Answer and Explanation:

amount borrowed = $10,000

interest rate =12%

interest accrued = $10,000*12%*1/12

                            = $100

date             general journal                          debit                    credit

jan 31            interest expense                       100                      

                        interest payable                                                    100