QUESTION: A company has a liability for a loan with an outstanding balance of $100,000 and an interest rate of 5%. The interest is payable annually. What would be the journal entry to record the interest expense for the year?

Answer: The journal entry would be: Interest expense (expense) - $5,000 Interest payable (liability) - $5,000

Here's the tabulated working calculation for the journal entry to record the interest expense for the year:

To record the interest expense for the year, we need to debit the interest expense account for the interest expense incurred during the year, and credit the interest payable account for the same amount. Since the interest is payable annually, we can assume that the entire interest expense of 5% of $100,000 or $5,000 is incurred and payable at the end of the year. The journal entry would be:

Debit interest expense (expense) for $5,000

Credit interest payable (liability) for $5,000

Therefore, the journal entry to record the interest expense for the year would be:

Interest expense (expense) - $5,000

Interest payable (liability) - $5,000