On September 1, 2019, Donna Equipment signed a one-year, 8% interest bearing note payable for $100,000. Assuming Donna maintains its books on a calendar year basis, the amount of interest expense that should be reported in the 2020 income statement for this note would be (assume 12 months per calendar year):

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Interest expense = Principal x Interest rate x Time= $100,000 x 8% x 1 year= $8,000Since the note was signed on September 1, 2019, only 4 months of interest expense should be recognized in 2019. The remaining 8 months of interest expense should be recognized in 2020.Therefore, the amount of interest expense that should be reported in the 2020 income statement for this note would be $8,000 x 8/12 = $5,333.

On September 1, 2019, Donna Equipment Signed a One-Year, 8