Question

West Company borrowed $36,000 on September 1, 2016 from the Valley Bank. West agreed to pay interest annually at the rate of 6% per year. The note issued by West carried an 18-month term. Based on this information the amount of interest expense appearing on West's 2016 income statement would be:a. $0 b. $234 c. $585 d. $780

Answer 1

Answer:

$720

Explanation:

Given that,

Principal = $36,000

Rate = 6% per year

Note issued by West carried an 18-month term.

Time period: 1st September to December = 4 Months

Interest expense = Principal × Rate × Time period

= 36,000 × 6% × (4 ÷ 12)

= $720

Therefore, the amount of interest expense appearing on West's 2016 income statement would be $720.