Global Enterprises, Inc. signed a one-year $46,000 note payable at 9% interest on April 1, 2018. If Global only adjusts its accounts once a year at year-end, how much interest expense was accrued on December 31, 2018? (Round any intermediate calculations to two decimal places, and your final answer to the nearest whole number.)

Question

Quizplus · Accepted Answer

Since Global only adjusts its accounts once a year at year-end, it means that it has not yet recorded any interest expense related to the note payable. The interest expense that will be accrued on December 31, 2018, will be for a period of 9 months (from April 1, 2018, to December 31, 2018).

To calculate the interest expense, we need to first determine the interest for the full year of $46,000 at 9%, which is:

$46,000 * 9% = $4,140

Next, we need to prorate this amount for the 9 months from April 1, 2018, to December 31, 2018, using the following formula:

Interest expense = Principal x Interest rate x Time

Interest expense = $46,000 x 9% x 9/12 = $3,105

Therefore, the answer is C, $3,105.