On June 1, Edison, Inc. borrowed $21,000 on a one-year Note Payable with an interest rate of 10% per year. It will repay the principal and interest at the end of the one-year period. The company makes accrual adjustments at the end of each month. The company should record interest expense of $2,100 on June 30.

Question

Quizplus · Accepted Answer

The interest expense for one month would be $175 ($21,000 * 10% annual interest rate / 12 months = $175), not $2,100.