Jane's Donut Co. borrowed $200,000 on January 1, 2009, and signed a two-year note bearing interest at 12%. Interest is payable in full at maturity on January 1, 2011. In connection with this note, Jane's should report interest expense at December 31, 2009, in the amount of:

Question

Quizplus · Accepted Answer

The interest expense for the first year would be ($200,000 x 0.12) = $24,000. As interest is payable in full at maturity on January 1, 2011, there is no need to accrue interest expense for the second year (year ending December 31, 2010). Therefore, the answer is B.