On October 1,2015,Harrison Company borrowed money by issuing a $24,000 face value discount note to its bank.The note had an 8% discount rate and had a term of 1 year.On December 31,2015,Harrison should accrue interest expense in the amount of $1,920.

Question

Quizplus · Accepted Answer

The interest expense for the year should be calculated based on the discount rate and the term of the note. The discount on the note is $24,000 * 8% = $1,920 for the entire year. However, since the note was issued on October 1, 2015, only 3 months of interest should be accrued by December 31, 2015, which is $1,920 * (3/12) = $480.

On October 1,2015,Harrison Company Borrowed Money by Issuing a $24,000