Question

Borrowed $24,000 cash from Fargo Bank by signing a 60-day, 9%, $24,000 note payable. What is the interest expense on the note payable?

1) $180
2) $360
3) $540
4) Cannot be determined

Answer 1

The interest expense on the note payable is calculated using the simple interest formula resulting in \$360.

Step-by-step explanation:

The interest expense on a 60-day, 9% note payable of $24,000 is calculated using the formula for simple interest: Interest = Principal × Rate × Time. Here, the principal is $24,000, the annual interest rate is 9%, and the time is 60 days out of a 360-day year. Therefore, the interest expense can be calculated as follows:

Interest = $24,000 × (9/100) × (60/360) = $360.

The correct answer is 2) $360.