Question

On September 1, 2019, Rowen Manufacturing issued a $90,000, 6-month, 9% note payable to purchase equipment. At December 31, 2019, the company records an adjusting entry to accrue interest incurred by not paid. The company pays the note with interest at the maturity date.

What is the adjusting journal entry at December 31 to record the accrued interest on the note payable?

Answer 1

Date of note issue = September 1, 2019

Par value of note = $90,000

Interest rate = 9%

At December 31, 2019, interest will accrue for 4 months.

Interest payable at December 31, 2019 = Par value of note x Interest rate x 4/12

= 90,000 x 9% x 4/12

= $2,700

The following adjusting journal entry at December 31 to record the accrued interest on the note payable:

Date	General journal	Debit	Credit
December 31, 2019	Interest expense	$2,700
	Interest payable		$2,700

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