Question

On July 1, 2021, Ross-Livermore Industries issued nine-month notes in the amount of $1,200 million. Interest is payable at maturity. Required: Determine the amount of interest expense that should be recorded in a year-end adjusting entry under each of the following independent assumptions: (Enter your answers in millions (i.e., 10,000,000 should be entered as 10).)

Answer 1

Answer and Explanation:

The computation of the interest expense that should be recorded to the following independent assumptions are as follows:

For December 31, 2021

= $1,200 × 11% × 6 months ÷ 12 months

= $66 million

For September 30, 2021

= $1,200 × 8% × 3 months ÷ 12 months

= $33 million

For October 31, 2021

= $1,200 × 7% × 4 months ÷ 12 months

= $44 million

For January 31, 2022

= $1,200 × 4% × 7 months ÷ 12 months

= $77 million