Started business on Jan.1st. List below are some events thatoccurred its first y

Question

Started business on Jan.1st. List below are some events thatoccurred its first year operation. 1. Equipment worth $150,000 was purchased on Sep.1st, in exchangefor $50,000 in cash and two- year, 10% note with aprincipal amount of $100,000. 2. There was no interest paid on the note during theyear.
The question is: What is the interest expense(which is on the debit side) forthis year. And what is the interest payable(which is on the credit side)for this year. Started business on Jan.1st. List below are some events thatoccurred its first year operation. 2. There was no interest paid on the note during theyear.
The question is: What is the interest expense(which is on the debit side) forthis year. And what is the interest payable(which is on the credit side)for this year.

Explanation / Answer

AT THE END OF THE YEAR THE ENTRY IS : Interest Expense...................Dr.    $3,333       Interestpayable..............Cr.               $3,333 (for 4 months interest is due $100,000 x 10% x 4/12)

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