Answer :-
The correct answer is -
Interest Expense | $375 | |
Interest Payable | $375 |
Explanation:
We have to calculate theFive months Interest Expense from August to December
Interest owed = $18,000 × 5% × 5 /12 = $375
The adjusting entry required is debit to Interest Expense and a credit to Interest Payable for $375 as of December 31,Year 1.
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