[danigrace15]

This is the adjusting entry statement:

The $48,000 note payable is dated August 31, 2004, and bears interest at 12 percent per annum. The note and interest are payable at the maturity on November 13, 2004. (Assume a 365-day year and round to the nearest dollar)

I am preparing adjusting entries for year ended September 30, 2004.

HELP!

Thanks
-D

[morgaine300]

Interest is principal x rate x time. In this case, when they're telling you to use 365, then time is days/365.

For instance:


So how many days since the note was taken out until the adjusting entry?

This is an accrued expense. Accruals are when the revenue or expense has already occurred, but money has not exchanged hands yet. Specifically, an accrued expense is what you have incurred but haven't paid for yet. So you need to recognize the expense of the interest, and since it has been paid yet, it goes into interest payable.

Can you put it together from there?