Answer:
Sky Mountain's adjusting entry four months later at December 31 would include:
Debit Interest expense $1,080
Credit Interest Payable $1,080
Explanation:
Sky Mountain Co. borrowed $54,000 on a 6% note payable to Coast National Bank.
The amount of interest for 1 year = $54,000 x 6% = $3,240
The amount of interest for 1 month = $3,240/12 = $270
From September 1 to December 31, in Sky Mountain Co.
The amount of interest expense = $270 x 4 = $1,080
Sky Mountain's adjusting entry at December 31:
Debit Interest expense $1,080
Credit Interest Payable $1,080
