Warren Company borrowed $20,000 on September 1, 2013 from the National Bank. Warren agreed to pay interest annually at the rate of 6% per year. The note issued by Warren carried an 18-month term. Based on this information the amount of interest expense appearing on Warren's 2013 income statement would be
A)$-0-.
B)$400.
C)$120.
D)$300.

Question

Quizplus · Accepted Answer

$20,000 x 6% x 4/12 months = $400 interest expense; The fact that it was an 18-month note does not affect the 2013 interest expense.

Warren Company Borrowed $20,000 on September 1, 2013 from the National