## Interest Expense:

Interest expense is a charge that a company has to pay irrespective of making profits or losses during a fiscal period. It is the cost of using the amount borrowed for a specific period of time and is paid to the lender by the borrower on a periodic basis or at maturity depending on the type of borrowing. Interest expense is a tax-deductible expense that reduces the tax burden of a company.

The journal entry that will be made by Indigo Company for the payment of note on the maturity date is made below:

 Date General Journal Debit Credit June 11 Notes payable $10,500 Interest expense$175 Cash $10,675 Explanation: As per the data provided: • Face value of note =$10,500
• Note period = 60 days
• Interest rate = 10%

Computation:

• Interest expense on maturity = Face value of note * Interest rate * Note period / 360 days
• Interest expense on maturity = $10,500 * 10% * 60/360 • Interest expense on maturity =$175

And,

• Cash paid = Face value of note + Interest due on note
• Cash paid = $10,500 +$175
• Cash paid = \$10,675