On December 1,Casualty Insurance Company borrowed $50,000 at a 6.0% interest rate from One Mutual Bank.The note payable plus interest will not be paid until April 1 of the following year.The company's annual accounting period ends on December 31.The adjusting entry needed on December 31 is:

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The adjusting entry needed on December 31 is to record the interest expense incurred from December 1 to December 31. Since the annual interest rate is 6.0%, the monthly interest rate is 6.0%/12 = 0.5%. Therefore, the interest expense from December 1 to December 31 is $50,000 x 0.5% x 1/12 = $250. The entry should be a debit to Interest Expense for $250 and a credit to Interest Payable for $250. The note payable is not affected by this entry, as it will be recorded separately on the balance sheet.

On December 1,Casualty Insurance Company Borrowed $50,000 at a 6