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13 October, 21:39

On December 1, Milton Company borrowed $350,000, at 6% annual interest, from the Tennessee National Bank. Interest is paid when the loan matures one year from the issue date. What is the adjusting entry for accruing interest that Milton would need to make on December 31, the calendar year-end

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  1. 14 October, 01:30
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    The the adjusting entry for accruing interest is:

    Debit Interest expense $1,750

    Credit Interest Payable $1,750

    Explanation:

    On December 1, Milton Company borrowed $350,000, at 6% annual interest.

    The interest amount Milton Company paid for 1 year = $350,000 x 6% = $21,000

    The interest amount Milton Company paid for a month = $21,000/12 = $1,750

    On December 31, following 1 month borrowing, Milton made adjusting entry for accruing interest:

    Debit Interest expense $1,750

    Credit Interest Payable $1,750
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