Respuesta :
If Carla Vista Brick company prepares financial statements on June 30 then the adjusting entry will be :
- Interest Expense Dr. $8,640
To Interest Payable $8,640
Give a brief account on interest expense.
An entity's interest expense can be regarded as the cost of borrowing money. Interest costs are shown as a non-operating expense on the income statement. All borrowings, including bonds, loans, convertible debt, and credit lines, must be repaid with interest. Basically, it is calculated by dividing the principle balance of the debt by the interest rate. Interest expenditure on the income statement displays interest accrued during the entire period covered by the financial statements, as opposed to the amount of interest paid during that time. Although interest expenses are tax deductible for corporations, they could not be in the case of an individual, depending on their jurisdiction and the purpose of the loan.
To solve the question :
Interest expense = Loan × interest × time
432000 × 4/100 × 6/12
= $8,640
Interest Expense $8,640
To Interest Payable $8,640
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