Bondi Bank agrees to lend Tawonga Construction Company Ltd $200,000 on 1 January. Tawonga Construction Company Ltd signs a $200,000, 4%, 9-month note.
-What is the adjusting entry required if Tawonga Construction Company Ltd prepares financial statements on 30 June?

Question

Quizplus · Accepted Answer

A debit to Interest expense to record the interest expense to date and a credit to interest payable to record the liability to the bank for the interest. The amount of the entry is $4,000 (($200,000 x 4%)/12) x 6.

Bondi Bank Agrees to Lend Tawonga Construction Company Ltd $200,000