Instalment payments on Faubert’s long-term debt begin in Year 6; $10,000 is due each year for four years. Faubert does not intend to make the Year 6 scheduled payment; the Year 6 and Year 7 amounts will be paid in Year 7, including interest and penalties totaling $2,720.

Journal entry would be like this for year 6 and year 7 for interest and penalties.

Interest and penalties expense $2,720

                                 Interest Payable $2,720

 Necessary

We are in year 5, should we not make any adjustments like the one above? Or No journal entry since it is only year 5, not year 6.

For the $10,000 (due each year for four years), we wouldn't do a journal for that since that would already be recorded?

Answer rating: 100% (QA)

Yes you are correct in your understanding In year 5 we do not need to make any adjustments related t... View the full answer