Question

On July 1, 2018, Ross-Livermore Industries issued nine-month notes in the amount of $800 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 Ends: Principal (million) x Rate x Time = Interest Expense December 31, 2018 $ 800 x 14% x = million September 30, 2018 $ 800 x 10% x = million October 31, 2018 $ 800 x 9% x = million January 31, 2019 $ 800 x 6% x = million

Answer 1

Fiscal year end	Principal $ Millions (A)	Interest rate (B)	Number of months (C) *	Interest $ Millions (D)**
31 Dec. 2018	800	14%	6	56
30 Sep. 2018	800	10%	3	20
31 Oct. 2018	800	9%	4	24
31 Jan. 2019	800	6%	7	28

* calculated as number of months from and including July 2018

**calculated as A*B*C/12