On November 1,Metro Corporation borrowed $55,000 from a bank and signed a 12%,90-day note payable in the amount of $55,000.The November 30 adjusting entry will be (assume 360 days in year):

Question

Quizplus · Accepted Answer

The adjusting entry is necessary to record interest expense and interest payable for the month of November. The amount of interest expense can be calculated as follows:
($55,000 x 12% x 30/360) = $550
This means that the company owes $550 in interest expense for the month of November, but the payment is not due until the end of the 90-day note period. Therefore, the entry should be a debit to Interest Expense and a credit to Interest Payable for $550.

On November 1,Metro Corporation Borrowed $55,000 from a Bank and Signed