ABC Company signed a one-year $48,000 note payable at 8% interest on May 1, 2014. If ABC only adjusts their accounts once a year at year-end, how much interest expense was accrued on December 31, 2014?
A)$1,280
B)$3,840
C)$2,560
D)$3,200

Question

Quizplus · Accepted Answer

The interest expense accrued from May 1 to December 31 is for 8 months. The annual interest is $48,000 * 8% = $3,840. For 8 months, the interest is $3,840 * (8/12) = $2,560.

ABC Company Signed a One-Year $48,000 Note Payable at 8