Question

Chandler Co. has a loan that accrues interest at a rate of $28 a day. The company pays the interest once a quarter. What adjustments would be made at the end of a month in which no payment for interest was made?

Answer 1

Answer:

The Adjustment Entry for accrual of Interest Expense will be as follows:

                                              Dr.       Cr.

Interest Expense                $840

Interest accrued Payable               $840

Explanation:

Interest per day = $28

Interest expense for the Month = $28 x 30 = $840

$840 of Interest expense will be accrued at the end of the month and it should be adjusted accordingly.