ABC Company owes the bank $40,000 on their mortgage. The bank charges them $300 a month in interest. At the end of the accounting period, ABC owes the bank three months of interest. The adjusting journal entry made by ABC Company will include:

Question

Quizplus · Accepted Answer

ABC Company needs to recognize the interest expense incurred over the three months. The interest is $300 per month, so for three months, it is $900. Therefore, the adjusting entry will include a debit to Interest Expense for $900.

ABC Company Owes the Bank $40,000 on Their Mortgage