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    blitz07's Avatar
    blitz07 Posts: 1, Reputation: 1
    New Member
    		  
    #1

    Dec 6, 2007, 03:50 AM
    Journal entry
    Please let me know if I am on the right track I think my dollar amount could be wrong. My question was, On September 1, the painting service borrows $50,000 from the bank on a 4-month, 6% note.
    I need to make a journal entry for December 31 before financial statements are prepared.
    My answer is
    Debit - Interest expense 1,000
    Credit - Interest payable 1,000
    Thanks
    pready's Avatar
    pready Posts: 3,197, Reputation: 207
    Ultra Member
    		  
    #2

    Dec 6, 2007, 04:05 PM
    yes,
    the interest expense is computed as follows:
    $50,000 * 6% * 4/12 = Interest Expense. This is a debit to Interest Expense
    PRT=I Principle * Rate * Time = Interest
    If the payment has not been made then the credit will be to Interest Payable.
    If the payment has been made then the credit will be to Cash
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