Question

For each separate case below, follow the three-step process for adjusting the accrued expense account at

December 31. Step 1: Determine what the current account balance equals. Step 2: Determine what the

current account balance should equal. Step 3: Record the December 31 adjusting entry to get from step 1

to step 2. Assume no other adjusting entries are made during the year.

a. Salaries Payable. At year-end, salaries expense of \(15,500 has been incurred by the company but is

not yet paid to employees.

b. Interest Payable. At its December 31 year-end, the company owes \)250 of interest on a line-of-credit

loan. That interest will not be paid until sometime in January of the next year.

c. Interest Payable. At its December 31 year-end, the company holds a mortgage payable that has incurred

$875 in annual interest that is neither recorded nor paid. The company intends to pay the interest

on January 7 of the next year.

Short answer

Interest expense account debit and interest payable is credit with $875

Step-by-step solution

Definition of interest payable

Interest payable mean interest is due but not paid.

The current account balance equals

Interest payable, current account equals $0.

The current account balance should equal

Interest payable, current account should equal $875

Adjusting entry

	Journal entry
Date	Particulars	Debit	Credit
December 31	Interest Expense	$875
	Interest Payable		$875
	(Adjustment entry for the interest expense)