Goodman Company borrowed $100,000 cash on September 1,20B,and signed a one-year,12%,interest-bearing note payable.What would be the required adjusting entry at the end of the accounting period,December 31,20B?

Question

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The adjusting entry would record the interest expense incurred from September 1 to December 31. The interest for four months (1/3 of the year) is $100,000 * 12% * 1/3 = $4,000. The entry would debit Interest Expense and credit Interest Payable for $4,000.

Goodman Company Borrowed $100,000 Cash on September 1,20B,and Signed a One-Year,12%,interest-Bearing