Innovate Company borrowed on a one-year,10%,$150,000 note on May 1,2017 with interest and principal to be paid at maturity.How much interest should Innovate Company report on its income statement for the year ending December 31,2017?

Question

Quizplus · Accepted Answer

The interest for 8 months (May to December) is calculated as $150,000 * 10% * (8/12) = $10,000. However, since the question asks for the interest to be reported on the income statement for the year ending December 31, 2017, only the interest accrued during this period is considered, which is $10,000, not the total annual interest.

Innovate Company Borrowed on a One-Year,10%,$150,000 Note on May 1,2017