Question

The pita pit borrowed $192,000 on november 1, 2018, and signed a six-month note bearing interest at 12%. principal and interest are payable in full at maturity on may 1, 2019. in connection with this note, the pita pit should report interest expense at december 31, 2018, in the amount of (do not round your intermediate calculations):

Answer 1

The interest expense is $3,850.52. 12% annual interest is equivalent to a daily interest rate of 0.0328767123% in 2018, a 365 day year, and with 61 days between November 1 and December 31 the amount calculated is (0.0328767123/100)*61*192000 which is equal to 3,850.52.