On Oct. 1, 2017, Bianca Inc. signed a 1-year $75,000 note payable from Prime National Bank. The loan plus 4% interest is to be repaid on Sept. 30, 2018. Bianca's year-end is December 31. In its 2017 financial statements Bianca will record interest expense of:
A)$3,375.
B)$750.
C)$250.
D)$1,000.
E)$3,000.

Question

Quizplus · Accepted Answer

The interest for the year 2017 is calculated for 3 months (October, November, December) at 4% annual interest on $75,000. The interest expense is $75,000 * 4% * (3/12) = $750.

On Oct 1, 2017, Bianca Inc