Question

On September 1, Year 1, West Company borrowed $50,000 from Valley Bank. West agreed to pay interest annually at the rate of 6% per year. The note issued by West carried an 18-month term. West Company has a calendar year-end. What is the amount of interest expense that will be reported on West's income statement for Year 1

Answer 1

$999.90

Step-by-step explanation:

The interest expenses will be charged for 4 month (September 1 to December 31)

Interest expenses = $50,000 * 6% * 4/12

Interest expenses = $50,000 * 0.06 * 0.3333

Interest expenses = $999.90

So, the amount of interest expense that will be reported on West's income statement for Year 1 is $999.90