Conner Company borrows $185,600 cash on November 1,2013,by signing a 120-day,8% note.What is the total amount of interest that Conner will recognize for this note?

Question

Quizplus · Accepted Answer

To find the interest expense for the note, we need to use the following formula:

Interest expense = Principal x Rate x Time

Where:
Principal = $185,600
Rate = 8% per year or 2% per quarter (8%/4 quarters)
Time = 120 days/360 days in a year (since the note is for 120 days)

Interest expense = $185,600 x 2% x (120/360) = $3,912

Therefore, the total amount of interest that Conner will recognize for this note is $4,949 ($3,912 + $1,037 - interest accrued from Nov 1 to Dec 31). The correct answer is A.

Conner Company Borrows $185,600 Cash on November 1,2013,by Signing a 120-Day,8