On September 1, Kennedy Company loaned $102,000 at 10% interest to a customer. Interest and...

Question:

On September 1, Kennedy Company loaned $102,000 at 10% interest to a customer. Interest and principal will be collected when the loan matures one year from the issue date.

Assuming adjustments are only made at year-end, what is the adjusting entry for accruing interest that Kennedy would need to make on December 31st, the year end?

Interest Expense

Interest Expense is the cost of borrowing money from another individuals or entities like banks. Simple Interest calculation is derived by multiplying the face value of the amount borrowed by the interest rate, the product of which will then be multiplied to the number of periods passed.

Answer and Explanation:

Face Amount if the Loan $102,000
x Interest Rate 10%
Total 10,200
x Periods Passed 4/12 mos.
Interest Expense $3,400


Answer: $3,400


Learn more about this topic:

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How to Calculate Interest Expense: Formula & Example

from Financial Accounting: Help and Review

Chapter 5 / Lesson 18
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