Question

Gary's Grocery borrowed $12,000 at 8% interest on May 1, 2024, with principal and interest due on April 30, 2025. The company's fiscal year ends December 31. What amount of interest expense would appear in the company's income statement for the year ended December 31, 2024, related to this loan?

Answer 1

The amount of interest expense that would appear in Gary's Grocery's income statement for the year ended December 31, 2024, related to the loan is $642.47. This is calculated using the simple interest formula and the given values of principal, interest rate, and time.

Step-by-step explanation:

The amount of interest expense that would appear in Gary's Grocery's income statement for the year ended December 31, 2024, related to the loan is calculated using the simple interest formula.

First, we need to determine the number of days between May 1, 2024, and December 31, 2024, which is 245 days. Then, we can calculate the interest expense using the formula:

Interest Expense = Principal x Interest Rate x Time

Using the given values:

Principal = $12,000

Interest Rate = 8%

Time = 245 days / 365 days

Plugging in these values, we get:

Interest Expense = $12,000 x 0.08 x (245/365) = $642.47

Therefore, the amount of interest expense that would appear in Gary's Grocery's income statement for the year ended December 31, 2024, related to this loan is $642.47.