ABC Company signed a one-year $12,000 note payable at 8% interest on May 1, 2012. How much interest expense must be accrued on May 31, 2012?
A)$960
B)$320
C)$80
D)$40

Question

Quizplus · Accepted Answer

May has 31 days, so the interest expense for the month of May can be calculated as follows:

Interest expense = (principal amount x annual interest rate x number of days in the month) / (number of days in the year)

Interest expense = ($12,000 x 0.08 x 31) / 365
Interest expense = $80.22 (rounded to the nearest cent)

Therefore, the answer is C) $80.

ABC Company Signed a One-Year $12,000 Note Payable at 8