Question

In: Accounting

On September 1, 2019 Landstar Corporation borrowed $900,000 from TD Canada Trust and signed a six-month...

On September 1, 2019 Landstar Corporation borrowed $900,000 from TD Canada Trust and signed a six-month $900,000 note payable. The note bears an interest rate of 8% with interest to be paid on the first day of each succeeding month. The principal amount of $900,000 is to be repaid on the note’s maturity date. If Landstar has a December 31 year-end, and assuming all interest payments have been made as scheduled under the note, the adjusting entry on December 31, 2020 would be:

a.

$6,000

b.

$18,000

c.

$24,000

d.

No adjusting entry is required

Solutions

Expert Solution

Answer : Correct option is (a.) 6000

Reason :

As the interest of the month is paid in next month therefore Landstar Corporation need to pass an adjusting entry of $6000 equivalent to one month interest (900,000 * 8% * 1/12) by debiting Interest expenses and crediting Interest Payable .

ekkarill92 answered 2 years ago
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