<u>Answer</u>: Total Interest Expense is $4500 and Monthly Interest Expense is $750
<u>Explanation:</u> A Note Payable is borrowed for a period of 6 months @ 6% annual interest rate. Since the note payable is borrowed for 6 months only, the interest amount will be the annual interest amount divided by 2.
Annual Interest Amount = Principal × 6%
Annual Interest Amount = $150,000 × 6%
Annual Interest Amount = $9,000
But since the notes payable is taken as a loan for a period of six months,
Total Interest Payable = Annual Interest Amount ÷ 2
Total Interest Payable = $9,000 ÷ 2
<u>Total Interest Payable = $4,500</u>
Monthly interest expense, as it says monthly interest expense assumes equal amount each month and there are 6 months for which loan is taken. So the formula will be:
Monthly Interest Expense = Interest Payable ÷ 6
Monthly Interest Expense = $4500 ÷ 6
Monthly Interest Expense = $750
<u>Therefore, Monthly Interest Expense is $750.</u>
