Question

On december 1, milton company borrowed $300,000, at 8% annual interest, from the tennessee national bank. interest is paid when the loan matures one year from the issue date. what is the adjusting entry for accruing interest that milton would need to make on december 31, the calendar year-end?

Answer 1

Debit Interest Expense, £2,000; Credit Interest Payable; £2,000

Answer 2

At the conclusion of the accounting period, adjusting entries are made. The journal entry that Milton would have to make on December 31, is given:

Journal entry:

debit Interest Expense, $2,000;

credit Interest Payable, $2,000.

What do you mean by Adjusting entry?

Adjusting entries can be defined as journal entries that are used in accounting and accounting to assign income and expenditure towards the period wherein they actually occurred.

They are often made at the end of an accounting period.

Journal entry:

debit Interest Expense, $2,000;

credit Interest Payable, $2,000.

Interest Amount: [$300,000 * 0.08 * 1/12] = $2,000

Hence, The journal entry that Milton would have to make on December 31, is given above.

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