Question

. ABC borrows $100,000 on October 31, 2015 at 12% interest due on October 31, 2016. ABC closes its books on December 31. What is Interest Expense on this note for 2015?

- $12,000
- $9,000
- $3,000
- $2,000

Answer 1

The Interest Expense on this note for 2015 is approximately $2,027.40.

Step-by-step explanation:

The Interest Expense on this note for 2015 can be calculated based on the number of days that the loan was outstanding in 2015.

In this case, the loan was received on October 31, 2015, and the books were closed on December 31, 2015, which means the loan was outstanding for 61 days in 2015.

Using the formula:

Interest Expense = Principal x Rate x Time

Interest Expense = $100,000 x 12% x (61/365)

Interest Expense = $2,027.40

Therefore, the Interest Expense on this note for 2015 is approximately $2,027.40.