Question

Interest expense is: a. The effective interest rate times the amount of the debt outstanding at the beginning of the interest period. b. The stated interest rate times the amount of the debt outstanding at the beginning of the interest period. c. The effective interest rate times the face amount of the debt. d. The stated interest rate times the face amount of the debt.

Answer 1

The correct answer is A

Step-by-step explanation:

Interest expense is the expense, which is defined as the non- operating expense and it is represented on the income statement. It states the interest payable on the borrowings like lines of credit, loans, convertible debts or bonds.

The interest expense is computed as the interest rates multiply the outstanding principle amount of debt.

So, the interest expense is defined as the interest rate which is effective times the amount of debt outstanding during the interest period or starting of period.