On October 1, a company borrowed $200,000 on a two-year, 12% note, with interest and principal to be paid at maturity. How much interest expense will be reported on the income statement for the year ending December 31?

Question

Quizplus · Accepted Answer

Interest expense for the year ending December 31 is calculated as follows:Interest expense = Principal x Interest rate x Time= $200,000 x 12% x 3/12= $6,000

On October 1, a Company Borrowed $200,000 on a Two-Year