Question

Moss County Bank agrees to lend the Wildhorse Co. $650000 on January 1. Wildhorse Co. signs a $650000, 6%, 9-month note. What is the adjusting entry required if Wildhorse Co. prepares financial statements on June 30

Answer 1

Answer:

Debit : Interest charge $26,000

Credit : Note Payable $26,000

Explanation:

The interest charge for the 6 months expired on the note is the adjustment required.

Interest charge = $650000 x 6% x 6/9 = $26,000

therefore,

the adjusting entry required if Wildhorse Co. prepares financial statements on June 30 is :

Debit : Interest charge $26,000

Credit : Note Payable $26,000