My question is based on the transaction emphasized with red line in picture 1,

why we don't recognize the interest expense in income statement (14000 * 10% divided by 3) , and interest payable in balance sheet (14000 * 10% divided by 2)?

This year, the company probably has paid the interest expense since it's already December 31.

Required information [The following information applies to the questions displayed below.] Tunstall, Inc., a small service company, keeps its records without the help of an accountant. After much effort, an outside accountant prepared the following unadjusted trial balance as of the end of the annual accounting period on December 31: Credit Debit $ 46,400 11,300 470 730 17,400 $ 8,700 9,360 2,350 Account Titles Cash Accounts receivable Supplies Prepaid insurance Service trucks Accumulated depreciation Other assets Accounts payable Wages payable Income taxes payable Note payable 13 vears: 10% interest due each December 31) Common stock (4,600 shares outstanding) Additional paid-in capital Retained earnings Service revenue Remaining expenses (not detailed; excludes income tax) Income tax expense Totals 14,000 1,866 16,794 5,500 69,740 33,290 $ 118,950 $ 118,950 Data not yet recorded at December 31 included: a. The supplies count on December 31 reflected $200 in remaining supplies on hand to be used in the next year. b. Insurance expired during the current year, $730. c. Depreciation expense for the current year, $4,000. d. Wages earned by employees not yet paid on December 3, $720. e. Income tax expense, $5,380. Income Statement For the Year Ended December 31 Operating revenues 69,740 270 Service revenue Operating expenses Supplies expense Insurance expense Depreciation expense Wages expense Remaining expenses (not detailed) Interest expense 730 4,000 720 33,290 X Total expenses Operating income 39,010 30,730 Income taxes expense Net income Earnings per share $ $ 5,380 25,350 11.02 X Answer is complete but not entirely correct. TUNSTALL, INC. Balance Sheet At December 31 Assets Liabilities and stockholders' equity Current assets Current liablities $ Cash Accounts payable $ 2,350 46,400 11,300 Accounts receivable 720 200 Wages payable Income taxes payable Interest payable Supplies Prepaid expenses 5,380 X 0 $ $ 8,450 Total current assets Service trucks Accumulated depreciation 14,000 > $ 22,450 57,900 Total current liabilities 17,400 Notes payable, long-term (12,700) Total liabilities Stockholders' equity Common stock Additional paid-in capital Retained earnings 1,866 16,794 (5,600) X Other assets 9,360 13,060 Total stockholders' equity Total liabilities and stockholders' equity Total assets 71,960 $ 35,510