The interest is based on the previous outstanding principal balance of the note. In the above example, the note and the interest are paid quarterly. The series of journal entries through 2 January 2020, including the 31 December 2019 adjusting journal entry, is given in the table below. Both the principal and interest are payable in four quarterly installments, beginning on 1 October 2019. However, in this case, a payable and an expense are recorded instead of a receivable and revenue.įor example, suppose that on 1 July 2019, Dogget Company borrowed $10,000 from a local bank. The journal entry for accrued interest expenses corresponds to the entry for accrued interest revenue.
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