Firewood Company signed a three-year note payable for $58,000 at 9% annual interest.What is the interest expense for 2016 if the note was signed on 1 August 2016?
A)$2610
B)$15,660
C)$2175
D)$5220

Question

Quizplus · Accepted Answer

First, we need to determine how many months are left in 2016 from August 1st. There are 5 months left in 2016 (August, September, October, November, December).

Next, we can calculate the interest expense using the formula:

Interest Expense = Principal x Rate x Time

Where: 
- Principal = $58,000 
- Rate = 9% 
- Time = 5/12 (since there are 5 months left in the year)

Plugging in the numbers:

Interest Expense = $58,000 x 9% x 5/12 = $2,175

Therefore, the correct answer is C) $2,175.

Firewood Company Signed a Three-Year Note Payable for $58,000 at 9