USA how to write off an interest liability

[bigrich]

Hi,

My organization incurred a liability from the state government of $1million dollars and they where charging compound interest that accumulated to $ $900,000. The organization finally made a deal to pay the $1 million dollar debt in one shot if the government would waive the $900,000 interest liability. The government agreed.

Now my question is what is the journal entry to reverse this interest liability from my books ?

 

[kirby]

You take a look at the entry the company used to initially record the $900k interest liability and just reverse that entry. I GUESS they used an interest expense account but again look up the original entry.

 

[Counterofbeans]

If not interest, perhaps some penalty account?

Kirby is correct--just look at the originating JEs and reverse them.

 

[AllanMadan]

yes. you would have most likely recorded the initial $900k as an expense. Therefore, you should reverse the expense.