Question

On July 1, 2021, Ross-Livermore Industries issued nine-month notes in the amount of $600 million. Interest is payable at maturity.

Required:

Determine the amount of interest expense that should be recorded in a year-end adjusting entry under each of the following independent assumptions: (Enter your answers in millions (i.e., 10,000,000 should be entered as 10).)

	Fiscal Year End: Principal (million) x Interest Rate x Time = Interest Expense December 31, 2021 $600 x 10 % x = million September 30, 2021 $600 x 8 % x = million October 31, 2021 $600 x 7 % x = million January 31, 2022 $600 x 6 % x = million

Answer 1

Answer

Fiscal Year End:	Principal (million)	x	Interest Rate		x	Time = No of months since 1st July to Year end	=	Interest Expense
December 31, 2021	$600	x	10	%	x	6 / 12	=	$30	million
September 30, 2021	$600	x	8	%	x	3 / 12	=	$12	million
October 31, 2021	$600	x	7	%	x	4 / 12	=	$14	million
January 31, 2022	$600	x	6	%	x	7 / 12	=	$21	million