Answer:
December 31 2021 Interest expense $2000 Dr
Interest Payable $2000 Cr
Explanation:
The interest on note payable is an expense. Assuming that the year end adjusting entries are made on 31 December, we will accrue the interest on note that relates to this year i.e. 2021 following the accrual basis of accounting. The interest that relates to 2 months of 2021 i.e. November and December will be:
Interest expense = 100000 * 0.12 * 2/12 = $2000
The interest will be recorded as interest expense and the interest expense account will be debited. As the interest is due but will be paid on maturity, we will credit interest payable account by the amount of interest due.
