On October 1, 2013, a company borrowed $200,000 on a two-year, 12% note, with interest and principal to be paid at maturity. How much interest expense will be reported on the income statement for the year ending December 31, 2013?

Question

Quizplus · Accepted Answer

The interest expense for the year ending December 31, 2013, is calculated for three months (October, November, December) at 12% annual interest on $200,000. The calculation is: $200,000 * 12% * (3/12) = $6,000.

On October 1, 2013, a Company Borrowed $200,000 on a Two-Year