Question

New-Tech Corporation borrowed $20,000 from the bank on March 1, 2011. The note carried a 9% annual interest rate and a 1-year term to maturity. The company paid the principal and the interest in cash on the maturity date. What amount of interest expense will New-Tech Corporation show on its 2011 and 2012 income statements? 2011 2012 a $ -O- $1,800 b. $1,800 $ -O- $1,500 $ 300 d. $1,350 $ 450 c. OOOO mos

Answer 1

1) Interest expense

	2011	2012
Interest expense	20000*9%*10/12 = 1500	300

So answer is c)

c	$1500	$300

2) All Statement are correct but property, plant and equipment are not Current assets so it is incorrect statement

So answer is a) Property, plant and equipment is included in Current assets

3) Current liabilities

Unearned revenue	20000
Account payable	100000
Salaries payable	5000
Total Current liabilities	125000

So answer is c) $125000