At the end of the quarter, a company made an adjusting entry to recognize $1000 of interest costs that have been incurred this quarter in constructing a new piece of production equipment.

These interest costs can be capitalized into the original cost of the Equipment account (this is not Work in Process because we are not selling the equipment as inventory). Thus, we Dr. Equipment 1000. There is no cash involved because it is an adjusting entry, so we Cr. Interest Payable 1000.