On January 10, Chen Co. issued an $80,000, 6%, 90-day note payable to Rao Co. Using a 360-day year, what is the total interest expense of the note? a. $4,800b. $480c. None of these choices are correct. d. $1,200

Question

Business

Lewis Hayes

4 January, 11:48

On January 10, Chen Co. issued an $80,000, 6%, 90-day note payable to Rao Co. Using a 360-day year, what is the total interest expense of the note? a. $4,800b. $480c. None of these choices are correct. d. $1,200

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Answers (1)

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King Haley · Answer 1

d. $1,200

Explanation:

The computation of the interest expense is shown below:

= Principal * rate of interest * number of days : (total number of days in a year)

= $80,000 * 6% * (90 days : 360 days)

= $1,200

We simply apply the simple interest formula

Since the number of days and the total number of days are given so we considered the same for the computation part.