Answer :
The necessary adjusting entry for interest expense on December 31, 2011 is: Debit interest expense $160, Credit interest payable (liability)$160.
Adjusting journal entry
December 1, 2011
Debit Cash $24,000
Credit Note payable $24,000
December 31, 2011,
Debit interest expense $160
Credit interest payable (liability)$160
($24,000×8%×1/12)
February 1, 2012
Debit Note payable $24,000
Debit interest payable $160
Debit interest expense $160
($24,000×8%×1/12)
Credit Cash $24,320
Therefore The necessary adjusting entry for interest expense on December 31, 2011 is: Debit interest expense $160, Credit interest payable (liability)$160.
The complete question is:
Norbert Corporation borrowed $24,000 on December 1, 2011, by issuing a two-month, 8 percent note payable to Service One Credit Union. The entire amount of the loan, plus interest, is due February 1, 2012.
a. Prepare the necessary adjusting entry for interest expense on December 31, 2011.
b. Record the repayment of the loan plus interest on February 1, 2012.
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