Question

Jane's Donut Co. borrowed $200,000 on January 1, 2021, and signed a two-year note bearing interest at 12%. Interest is payable in full at maturity on January 1, 2023. In connection with this note, Jane's should report interest expense at December 31, 2021, in the amount of:

Answer 1

Answer:

Jane's should report interest expense at December 31, 2021, in the amount of $ 24000

Explanation:

Interest will be calculated as follows:

Interest from January 1, 2021 to December 31, 2021 = 200000 x 12 %

                                                                                       = 200000 x 12/100

                                                                                        = 200000 x 0.12

                                                                                        = 24,000

$24000 will be reported as interest expense at December 31, 2021