Auto Loan Payable has a credit balance of $32,883.62. Payment $869.98; due the 3rd of each...

Auto Loan Payable has a credit balance of $32,883.62.

Payment $869.98; due the 3rd of each month; 6% APR

It has been almost a month since interest was accrued on the auto loan. (Three days is immaterial. Use a whole month.)

What is the adjusting entry that need to be made for the interest?

Expert Solution

Working notes:
	CALCULATION OF INTEREST EXPENSES OF THE MONTH END
	Value of Auto Loan	$ 32,883.62
	Interest @ 6% = ($ 32,883.62 X 6% X 1/12 Mont)	$ 164.42

	Monthly Installment payment is made =	$ 869.98
	Less: Interest Expenses	$ 164.42
	Principal Value	$ 705.56


Solution:	Adjusting Entry

	Particulars	Debit	Credit

	Interest Expenses (Auto Loan)	$164.42
	Interest Payable		$164.42

ekkarill92 answered 3 years ago

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