Equestrain Roads sold $50,000 of goods and accepted the customer's $50,000 10%
1-year note in exchange.Assuming 10% approximates the market rate of return, how much interest would be recorded for the year ending December 31 if the sale was made on June 30?

Question

Quizplus · Accepted Answer

Since the sale was made on June 30th, the note will only accrue interest for six months until December 31st. To calculate the interest expense, we need to multiply the principal amount of $50,000 by the market rate of 10%, and then by the fraction of the year the note was outstanding.

Interest expense = $50,000 x 10% x 6/12 = $2,500

Therefore, the answer is C, $2,500.

Equestrain Roads Sold $50,000 of Goods and Accepted the Customer's