Randall Automotive signed a $5,000,120-day note payable on October 1 that bears interest at an annual...
Randall Automotive signed a $5,000,120-day note payable on October 1 that bears interest at an annual rate of 9%. How much will appear on Randall's income statement for interest expense related to this note at December 31?
Select one:
a. $112.50
b. $4,500
c. $150
d. $450
please show work and thank you :D
Homework Answers
option A is correct.
intrest expense related to the note is to be calculated based on accrual basis for the period oct to dec i.e.3 months. Accordingly the intrest expense will be calculated for 3 months proportionately.
hence
intrest expense = $5000× 9% × 3/12
intrest expense = $112.50
thank you.. .. ..
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