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 in 2019 for the amount of:
A)$0.
B)$4,000.
C)$2,000.

Question

Quizplus · Accepted Answer

The interest expense for the six-month period at 12% annual interest rate on a $100,000 loan is calculated as follows: $100,000 * 12% * (6/12) = $6,000. Since the note spans from November 1, 2018, to May 1, 2019, part of the interest accrues in 2018 and part in 2019. However, the question asks for the interest expense reported in 2019, which includes the entire interest expense for the note's duration because the interest is payable at maturity in May 2019. Therefore, the correct answer is $6,000, which is not explicitly listed among the provided choices, indicating a possible mistake in the question or in the interpretation of the choices. Based on the provided options, the closest correct answer would be $4,000, but this does not accurately reflect the calculation based on the given information.

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