Mission Corp.borrowed $50,000 cash on April 1,2019,and signed a one-year 12%,interest-bearing note payable.The interest and principal are both due on March 31,2020.
-The amount of interest expense for the year ended December 31,2019 is:

Question

Mission Corp.borrowed $50,000 cash on April 1,2019,and signed a one-year 12%,interest-bearing note payable.The interest and principal are both due on March 31,2020. 
-The amount of interest expense for the year ended December 31,2019 is:

Quizplus · Accepted Answer

The note payable is for $50,000 at 12% interest for one year, which means the total interest expense for the year is $6,000 ($50,000 x 0.12).

However, the interest expense for the year ended December 31, 2019, is only for 9 months (April 1, 2019 - December 31, 2019).

To calculate the interest expense for these 9 months, we need to multiply the principal amount of the note ($50,000) by the interest rate (12%) and then by the portion of the year during which interest has accrued (9/12, or 0.75).

$50,000 x 0.12 x 0.75 = $4,500

Therefore, the amount of interest expense for the year ended December 31, 2019, is $4,500.