A $36,000,two-month,12% note payable was issued on 1 December 2016.What is the amount of interest expense recorded in the year 2017?
A)$720
B)$414
C)$90
D)$360

Question

Quizplus · Accepted Answer

To calculate the interest expense for this note, we need to first calculate the interest accrued during the two-month period of December 2016 and January 2017.

Interest accrued = Principal x Rate x Time 
= $36,000 x 12% x 2/12 
= $720

This interest expense would be recorded in the year 2017, since it relates to the period after issuing the note. Therefore, the answer is D) $360.

A $36,000,two-Month,12% Note Payable Was Issued on 1 December 2016