On December 1,Watson Enterprises signed a $24,000,60-day,4% note payable as replacement of an account payable with Erikson Company.What amount of interest expense is accrued at December 31 on the note? (Use 360 days a year.)
A)$0
B)$80
C)$320
D)$960
E)$160

Question

Quizplus · Accepted Answer

To calculate interest expense, we use the formula: Interest Expense = Principal x Rate x Time

In this case, the principal is $24,000, the rate is 4%, and the time is 31 days (from December 1 to December 31).

To convert the time to a fraction of a year, we divide by the number of days in a year (360): 31/360 = 0.0861.

So, the interest expense is:

Interest Expense = $24,000 x 0.04 x 0.0861 = $82.08

Since this question asks for the amount accrued (not paid) at December 31, we need to round down to the nearest dollar. Therefore, the answer is $80 (Choice B).

On December 1,Watson Enterprises Signed a $24,000,60-Day,4% Note Payable as Replacement