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What is the adjusting journal entry on december

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Reference no: EM132651190

Problem 1: Gross profit is a subtotal on the Income Statement calculated by subtracting 'Cost of Good Sold' from 'Sales.' Alin Corporation borrows $50,000 from a bank on January 1, 2020. The loan has a 5% annual interest rate, and both interest and principal will be repaid when the loan is due on December 31, 2024. If Alin Corporation records interest expense as an adjusting entry at the end of the year, what is the adjusting journal entry on December 31, 2020?

Option 1: Dr. Interest Expense 2,500 and Cr. Cash 2,500

Option 2: Dr. Interest Expense 2,500 and Cr. Prepaid Interest 2,500

Option 3: Dr. Interest Expense 2,500 and Cr. Interest Payable 2,500

Option 4: Dr. Interest Payable 2,500 and Cr. Interest Expense 2,500

Reference no: EM132651190

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