Question

On September 1, Sky Mountain Co. borrowed $68,000 on a 6%, 9-month note payable to Coast National Bank. Given no previous adjusting entries have been recorded, Sky Mountain's adjusting entry four months later at December 31 would include a:

Answer 1

Answer and Explanation:

The journal entry is shown below:

Interest expense ($68,000 × 9% × 4 months ÷ 12 months) $2,040  

          To Interest payable $2,040

(Being the interest expense is recorded)

For recording this we debited the interest expense as it increased the expenses and credited the interest payable as it also increased the liabilities so that the proper journal entries could be recorded