On October 1st, a company borrowed $60,000 from Eighth National Bank on a 1-year, 7% note. If the company's fiscal year ends on December 31st, a year-end adjusting entry is required to increase

Question

Quizplus · Accepted Answer

Interest for three months (October, November, December) is calculated as $60,000 * 7% * (3/12) = $1,050. This amount represents the interest expense incurred but not yet paid by the end of the fiscal year, thus it should be recorded as interest payable.

On October 1st, a Company Borrowed $60,000 from Eighth National