Ask Question
10 February, 23:32

Slack Inc. borrowed $400,000 on July 1, 2020. The note requires interest at 12% and principal to be paid in one year. Which account is debited on December 31, 2020?

+1
Answers (1)
  1. 10 February, 23:39
    0
    The account is debited on December 31, 2020: Interest expense by the entry:

    Debit Interest expense $24,000

    Credit Interest Payable $24,000

    Explanation:

    Slack Inc. borrowed $400,000 on July 1, 2020. The note requires interest at 12%.

    The amount of interest Slack Inc. pays per year = $400,000 x 12% = $48,000

    On December 31, 2020, the company has borrowed $400,000 for 6 months. Following the Accrual basis, Slack Inc. would report on December 31, 2020 the interest expense for 6 months:

    $48,000/12 x 6 = $24,000

    The adjustment entry:

    Debit Interest expense $24,000

    Credit Interest Payable $24,000
Know the Answer?
Not Sure About the Answer?
Get an answer to your question ✅ “Slack Inc. borrowed $400,000 on July 1, 2020. The note requires interest at 12% and principal to be paid in one year. Which account is ...” in 📙 Business if there is no answer or all answers are wrong, use a search bar and try to find the answer among similar questions.
Search for Other Answers