USA Not sure if this example gains interest

Joined
Sep 26, 2016
Messages
3
Reaction score
0
Country
United States
So, I'm given a problem that says:

On September 1, 2018, the company borrows $22,000 from a local bank and signs a note. Principal and interest at 12% will be paid on August 31, 2019.

So, they sign a note and at that point, cash is debited for $22,000 and notes payable is credited that much. I'm supposed to write a year-end adjusting entry for this (I'm given the option to say no entry is needed). I'm not sure if I would need to put anything, because it says principal and interest will be paid in august, 2019. I assume this means that on December 31, 2018, nothing has changed and I don't need to put an adjusting entry. Is my logic flawed?
 

Triest123

VIP Member
Joined
Feb 12, 2012
Messages
269
Reaction score
51
So, I'm given a problem that says:

On September 1, 2018, the company borrows $22,000 from a local bank and signs a note. Principal and interest at 12% will be paid on August 31, 2019.

So, they sign a note and at that point, cash is debited for $22,000 and notes payable is credited that much. I'm supposed to write a year-end adjusting entry for this (I'm given the option to say no entry is needed). I'm not sure if I would need to put anything, because it says principal and interest will be paid in august, 2019. I assume this means that on December 31, 2018, nothing has changed and I don't need to put an adjusting entry. Is my logic flawed?
You should make an accrual for the interest expense for 4 months
 

Ask a Question

Want to reply to this thread or ask your own question?

You'll need to choose a username for the site, which only take a couple of moments. After that, you can post your question and our members will help you out.

Ask a Question

Top