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5 February, 22:00

On October 1, 2021, Hurricane lends $9,000 to another company. The other company signs a note indicating principal and 12% interest will be paid to Hurricane on September 30, 2022. Record the adjusting entry for interest at its year-end of December 31.

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  1. 6 February, 01:20
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    The adjusting entry for interest at its year-end of December 31:

    Debit Interest expense $270

    Credit Interest Payable $270

    Explanation:

    Hurricane lends $9,000 to another company with the rate of interest of 12%.

    The amount Interest expense Hurricane has to pay after 1 year:

    $9,000 x 12% = $1,080

    The amount Interest expense Hurricane records at December 31, 2021:

    $1,080/12 x 3 = $270

    The adjusting entry for interest at its year-end of December 31:

    Debit Interest expense $270

    Credit Interest Payable $270
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