Question

Vaughn Manufacturing borrowed $399000 on April 1. The note requires interest at 12% and principal to be paid in one year. How much interest is recognized for the period from April 1 to December 31?

Answer 1

Interest recognized is $35,910

Step-by-step explanation:

The computation of interest recognized is shown below:

= Principal × rate of interest × number of months ÷ (total number of months in a year)

= $399,000 × 12% × (9 months ÷ 12 months)

= $35,910

The 3 months is calculated from April 1 to December 31

Hence, the interest i.e. to be recognized is $35,910