Create the adjusted journal entry: 1.A $12,000, 4-year note was signed with the

Question

Create the adjusted journal entry:

1.A $12,000, 4-year note was signed with the bank on 12-31-15. This note is to be paid off in equal amounts with the first payment due on 12-31-16. The annual payment required each Dec 31 must also include interest at a 4% annual rate on the toal unpaid balance that exists at 12-30. An entry to establish the proper amount of the"current portion of long-term debt" has already been recorded. [long term debt (notes payable) = 9000]. Thus an AJE needs to be made to record the accured interest on the total balance (i.e. the sum of the short and long term note payable).

Explanation / Answer

Interest = $ 12000*4% = $ 480

Interest Expense Debit $ 480

Accrued Interest credit $ 480

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