Question

On September 1, 2019, Coral Equipment signed a one-year 8% interest-bearing note payable for $50,000. Assuming that Coral Equipment maintains its books on a calendar year basis, the amount of interest expense that should be reported on the 2020 income statement for this note would be :

Answer 1

Answer:

$8,000

Explanation:

Base on the scenario been described in the question, we are to use simple interest to calculate the given problem

We are given

Time = 2years

rate = 8%

Principal = $50,000

Simple interest formula is given below

I = PRT/100

Substituting the values into the question, we have

I = $50,000×8×2/100

I = $800,000/100

I = $8,000