For the quarter ended June 30, 2007, I'm supposed to make an adjusting entry for a note payable, and the statement reads:
Note payable is a 8% note dated May 1, 2007, and due on July 31, 2007.
Ledger balance at the end of June for Note payable account is $12,000.

Here's what I did:
12000 * (2/3) since the note payable is for 3 months and I need for 2 months as I'm adjusting at the end of June.
Then, (0.08 * 12000) x (2/3) to find the interest for 2 months and add it to the answer I got previously.

So the final answer is 8,640 and the entries are:
Dr. Notes Payable $ 8, 640
Cr. Cash? $ 8, 640

Now I haven't come across any adjusting entries like this one, so I highly doubt my answer is right. Can someone please tell me if my calculations are right and what to write for the adjusting entry?
I'm utterly confused

qcmar24

Ok, For what I read the problem is not saying that you are actually paying any ammount in the note payable, so you only need to recorded the interest expense and the interest payable on the note for 60 days because the note is for 90 days but only 60 has passed
interest for the passed 60 days 12,000 x 0.08 x 60 /360 = $160
total interest for the 90 days 12,000 x 0.08 x 90 / 360= $240

then:
Dr. Interest Expense..................160
Cr. Interest Payable.............. 160

and then when the note expired and you pay it you would record:
Dr.Interest Payable...................160
Dr.Interest Expense.................. 80
Dr.Note Payable.......................12,000
Cr. Cash.................................... 12,240

interest for 30 days 12,000 x 0.08 x 30 / 360= $80
Hope this could help you.

Pseudonym

Thanks a lot!
I didn't know we're only supposed to record the interest. Thanks again.