Nirvana Corporation issued a one-year, 9%, $400,000 note on April 30, 2015. Interest expense for the year ended December 31, 2015 was
A)$21,000.
B)$24,000.
C)$27,000.
D)$36,000.

Question

Quizplus · Accepted Answer

To calculate the interest expense for the year, we need to use the formula:

Interest expense = Principal x Rate x Time

Where:
Principal = $400,000
Rate = 9% = 0.09
Time = 8 months (from April 30 to December 31)

We need to convert 8 months to fractional form by dividing 8 by 12:
Time = 8/12 = 0.67

Now we can calculate the interest expense:
Interest expense = $400,000 x 0.09 x 0.67 = $24,120

Therefore, the closest answer is B, $24,000.

Nirvana Corporation Issued a One-Year, 9%, $400,000 Note on April