On december 1, casualty insurance company borrowed $50,000 at a 6.0% interest rate from one mutual bank. the note payable plus interest will not be paid until april 1 of the following year. the company's annual accounting period ends on december 31 and adjustments are only made at year-end. the adjusting entry needed on december 31 is

interest expense 250 debit

   interest payable               250 credit

to record accrued interest

Explanation:

on December 31th the company will recognize the accrued interest from December 1st to December 31th year-end date

principal x rate x time = interest

Is always important to notice that rate and time must be expressed on the same metric. generally the rate are annual, so we will express time as fraction of a 12 months year

50,000 x 6% x 1/12 = 250

This will be the amount for accrued interest at december 31th

correct, but each time you dont pay the price of the penalty can increase.