Straight Industries purchased a large piece of equipment from Curvy Company on January 1,2010.Straight Industries signed a note,agreeing to pay Curvy Company $400,000 for the equipment on December 31,2012.The market rate of interest for similar notes was 8%.The present value of $400,000 discounted at 8% for three years was $317,520.On January 1,2010,Straight Industries recorded the purchase with a debit to equipment for $317,520 and a credit to notes payable for $317,520.On December 31,2010,Straight recorded an adjusting entry to account for interest that had accrued on the note.Assuming no adjusting entries have been made during the year,how much interest expense would have accrued at December 31,2010?
A)$25,402
B)$32,000
C)$29,693
D)$27,493

Question

Quizplus · Accepted Answer

2010 interest expense ($25,402) = Note payable liability at the beginning of 2010 ($317,520) F1F1F1S1F1F1F10 Interest rate (8%)

Straight Industries Purchased a Large Piece of Equipment from Curvy