The Pita Pit borrowed $100,000 on November 1,2015,and signed a six-month note bearing interest at 12%.Principal and interest are payable in full at maturity on May 1,2016.In connection with this note,The Pita Pit should report interest expense in 2016 for the amount of:
A)$0.
B)$4,000.
C)$2,000.
D)$6,000.

Question

Quizplus · Accepted Answer

The interest expense for 2016 is calculated for the period from January 1 to May 1, 2016, which is 4 months. The annual interest is $12,000 (12% of $100,000), so for 4 months, it is $4,000.

The Pita Pit Borrowed $100,000 on November 1,2015,and Signed a Six-Month