The note payable to Royce Computers (transactions 04 and 07) is a five-year note, with interest at the rate of 12 percent annually. Interest expense should be computed based on a 360 day year.

[IMPORTANT NOTE: The original note on the computer equipment purchased on June 2 was $112,000.00. On June 10, eight days later, $21,500.00 was repaid. Interest expense must be calculated on the $112,000.00 for eight days. In addition, interest expense on the $90,500.00 balance of the loan ($112,000.00 less $21,500.00 = $90,500.00) must be calculated for the 20 days remaining in the month of June.]

To calculate the interest the formula is; Interest = Principle * Rate * Time

So take $112,000 * 12% * 8/360 = 8 days of interest.

Now you need to calculate 20 days of interest. All you need to do is change the principal amount and the number of days from 8 to 20 in the formula above.

The adjusting entry will include a Debit to Interest Expense and a Credit it Interest Payable.

So, I just add the two different interest totals together, correct?

Yes, you are correct.

Great! That is what I did, but I wanted to make sure that I did the right formula. Thank you so much!