Mariner,Inc.bought a lobster boat on November 1,2011 in exchange for a 2-month,6%,$80,000 note.The note plus interest will be repaid on January 1,2012,the maturity date.How much interest expense should the company report on its income statement for the month ended November 30,2011?

Question

Quizplus · Accepted Answer

The company only had the note for one month (November), so the interest expense would be calculated as follows: $80,000 x 6% x 1/12 = $400. Therefore, the correct answer is C. Option A is incorrect because interest has accrued for one month, and Option B and Option D are overestimates of the interest expense.