trent restaurant borrowed $110,000 on october 1 by signing a note payable to hometown bank. the interest…
trent restaurant borrowed $110,000 on october 1 by signing a note payable to hometown bank. the interest expense for each month is $825. the loan agreement requires trent to pay interest on january 2 for october, november and december. make the adjusting entry to accrue monthly interest expense for december. date accounts and explanation debit credit december 31 interest expense 825 interest payable 825 to accrue interest for december. 2. post all three entries to the interest payable account and calculate the ending balance as of december 31. interest payable
Answer
Explanation:
Step1: Identify monthly interest
The monthly interest expense is given as $825. There are three months (October, November, December) for which interest needs to be accrued. But we are only concerned with the posting to Interest - Payable.
Step2: Determine Interest - Payable entries
For each month of November and December, an adjusting entry is made to accrue interest. The interest payable account is credited each time. Since the monthly interest is $825, and we have two months of accrual (November and December) relevant to the Interest - Payable account posting. The calculation for the ending balance of Interest - Payable is the sum of the interest accrued for these two months. $825\times2 = 1650$
Answer:
The ending balance of the Interest Payable account as of December 31 is $1650$.