On December 1, Watson Enterprises signed a $24,000, 60-day, 4% note payable as replacement of an account payable with Erikson Company. What amount of interest expense is accrued at December 31, the company's year-end, on the note?
A)$0
B)$80
C)$320
D)$960
E)$160

Question

Quizplus · Accepted Answer

The interest expense is calculated using the formula: Principal x Rate x Time. Here, the principal is $24,000, the annual interest rate is 4%, and the time is 30/360 (since December 31 is 30 days from December 1). Thus, the interest expense is $24,000 x 0.04 x (30/360) = $80.

On December 1, Watson Enterprises Signed a $24,000, 60-Day, 4