On September 1,Year 1,West Company borrowed $10,000 from Valley Bank.West agreed to pay interest annually at the rate of 6% per year.The note issued by West carried an 18-month term.West Company has a calendar year-end.What is the amount of interest expense that will be reported on West's income statement for Year 1?
A)$-0-
B)$150
C)$60
D)$200

Question

Quizplus · Accepted Answer

Interest expense (September 1 through December 31)= $10,000 × 6% × (4 ÷ 12)= $200
The fact that it was an 18-month note does not affect the Year 1 interest expense.

On September 1,Year 1,West Company Borrowed $10,000 from Valley Bank