On 2 June 2019, Alice invested $25,000 into a 60-day term deposit with Bank at an interest rate of 2.50% per annum.
Interest totalling $102.74 will be paid by the bank on maturity 60 days later (ie. 31 July 2019).
What is the adjusting journal entry as at 30 June 2019?
Adjusting entry should be made in the books of the bank on June 30 for the interest expense | ||||
relating to the period June 2- June30. That is adjusting entry should be made for interest expense | ||||
during the period even if it is payable in July to comply with the accrual concept of accounting. | ||||
Entry to be made is interest expense account should be debited and interest payable should be | ||||
credited by an amount of $49.6576 ( $102.74*29/60days = $49.6576 ) | ||||
Debit | Credit | |||
Interest Expense | $ 49.6576 | |||
Interest payable | $ 49.6576 | |||
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