Question

Under either cash or accrual method of accounting, Jaxon can only deduct two months of interest because prepaid interest is not deductible under either method of accounting. What is the total interest amount that Jaxon can deduct?

1) 750
2) 1,500
3) 3,000
4) 4,500

Answer 1

Under either cash or accrual method of accounting, Jaxon can only deduct two months of interest because prepaid interest is not deductible under either method of accounting. The total interest amount that Jaxon can deduct is $60.

Step-by-step explanation:

Under either the cash or accrual method of accounting, Jaxon can only deduct two months of interest because prepaid interest is not deductible under either method. To determine the total interest amount that Jaxon can deduct, we need to know the monthly interest rate and the total loan amount.

Let's assume that the monthly interest rate is 1% (6% divided by 6 months).

If Jaxon's total loan amount is $3,000, then the total interest amount that he can deduct is 2 months x $3,000 x 1% = $60.

Therefore, the correct answer is option 1) $750.