Ch 2 Mamas Pizza Shoppe borrowed 8600 at 9 interest on May t

Ch. 2 Mama\'s Pizza Shoppe borrowed $8,600 at 9% interest on May t 2018, with principal and interest due on October 31, 2019 The company\'s fiscal year ends June 30, 2018. What adjusting entry is necessary on June 30 2018?

Solution

The correct answer is :

Note:

The amount of Interest Expense = Principal * Rate of Interest * Number of Months / Total Number of Months in a year

= $ 8,600 * 9% *2 /12

= $ 129

Interest Expense	129
Interest Payable		129