Rise and Shine Ice Cream prepares annual financial statements and has a December 31 year-end. As of March 1, 2023, Rise and Shine Ice Cream took out a bank loan for $12,000 with an interest rate of 8%. Interest is incurred on a monthly basis and needs to be recorded on December 31, 2023.
a. What is the formula to calculate interest expense?
b. How many months of interest expense have been incurred at December 31, 2023?
c. In order to prepare the annual financial statements, record the adjusting journal entry on December 31, 2023.