Jane's Donut Co.borrowed $200,000 on January 1,2016,and signed a two-year note bearing interest at 12%.Interest is payable in full at maturity on January 1,2018.In connection with this note,Jane's should report interest expense at December 31,2016,in the amount of:
A)$0.
B)$24,000.
C)$48,000.
D)$50,880.

Question

Quizplus · Accepted Answer

The interest expense for the first year (2016) can be calculated using the simple interest formula:

Interest = Principal x Rate x Time

where Principal = $200,000, Rate = 12%, and Time = 1 year.

Plugging in the values, we get:

Interest = $200,000 x 0.12 x 1 
Interest = $24,000

Therefore, the answer is B) $24,000.