During the fourth quarter ended December 31, Year 1, Lighting Fixtures Inc. (LFI) had average outstanding revolving bank loans of $1.2 million. Assume that the quarterly interest charges associated with these loans was $7,500. If LFI makes the interest payment to the banks on January 15, Year 2, what is the journal entry (if any) made by the company on December 31 to reflect the above?

Question

Belinda Mccullough

Business

16 July, 01:33

During the fourth quarter ended December 31, Year 1, Lighting Fixtures Inc. (LFI) had average outstanding revolving bank loans of $1.2 million. Assume that the quarterly interest charges associated with these loans was $7,500. If LFI makes the interest payment to the banks on January 15, Year 2, what is the journal entry (if any) made by the company on December 31 to reflect the above?

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Zoe Mcconnell · Answer 1

December 31, Year 1 DR. Cr.

Accrued Interest Expense $7,500

Interest Payable $7,500

Explanation:

On December 31 Year 1 Interest was accrued and It was recorded by the Lighting Fixtures Inc. (LFI) but its outstanding now. Lighting Fixtures Inc. (LFI) paid the interest on January 15, at this time a payment entry of a payable interest was be made. Expense was charged on December 31 of year 1.