Question

Nittany Company borrowed $60,000 from Lion Corporation on September 1, 2018 signing a 9-month payable with an interest rate of 3%. Nittany Co operates on a calendar year basis and is preparing its year-end financial statements In preparing its Income Statement for 2018, what amount of Interest Expense should Nittany Co. report from this note payable

Answer 1

Answer:

the interest expense that should be recorded in the income statement is $600

Explanation:

The computation of the interest expense is shown below:

= Borrowed amount × rate of interest × given months

= $60,000 × 0.03 ÷ 12 × 4 months

= $600

Hence, the interest expense that should be recorded in the income statement is $600