On July 1, 2016, Donna Equipment signed a one-year, 8% interest-bearing note payable for $50,000. Assuming that Donna Equipment maintains its books on a calendar year basis, how much interest expense should be reported in the 2017 income statement? A. $1,000. B. $2,000. C. $3,000. D. $4,000
Here answer B $2000
Calculated as
Interest expense to be for for 6 months from 1st Jan 2017 to 30th June 2017
Interest expense = 8% of $50000 for 6 months
= $50000 x 8/100 x 6/12
= $2000
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