The Pita Pit borrowed $100,000 on November 1,2018,and signed a six-month note bearing interest at 12%.Principal and interest are payable in full at maturity on May 1,2019.In connection with this note,The Pita Pit should report interest expense at December 31,2018,in the amount of:
A)$0.
B)$1,000.
C)$2,000.

Question

Quizplus · Accepted Answer

The interest expense for two months (November and December 2018) on a $100,000 loan at 12% annual interest is calculated as follows: $100,000 * 12% = $12,000 annual interest; $12,000 / 12 months = $1,000 per month; $1,000 * 2 months = $2,000.

The Pita Pit Borrowed $100,000 on November 1,2018,and Signed a Six-Month