Answer:
31 Dec 2019 Interest expense $2083.33 Dr
Interest Payable $2083.33 Cr
Explanation:
The adjusting entry is made under the accrual basis of accounting that follows that a particular period's revenues and expenses should be matched and recorded in the same period. The interest expense on the note that relates to the period from September 2019 to December 2019, 4 months, should be recorded in 2019 on 31 December.
The interest expense for 4 months is = 125000 * 0.05 * 4/12 = $2083.33
