Question

On June 1, 2013 Oakcrest Company signed a three year $110000, note payable with 9% interest. Interest is due on June 1 of each year beginning in 2014. What amount of interest expense should be reported on the income statement for the year ended December 31, 2013?

Answer 1

Answer:

$5,775

Explanation:

The computation of the interest payment is shown below:

= Note payable amount × rate of interest × number of months ÷ total number of months in a year

= $110,000 × 9% × 7 months ÷ 12 months

= $5,775

We simply multiplied with the note payable , interest rate, and the given number of months to find out the interest expense

And, the seven months is calculated from June 1, 2013 to December 31, 2013