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17 September, 17:14

On October 1, 2019, Donna Equipment signed a one-year, 8% interest-bearing note payable for $50,000. Assuming that Donna Equipment maintains its books on a calendar year basis, how much interest expense should be reported in the 2020 income statement?

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  1. 17 September, 20:43
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    Interest expense should be reported in the 2020 income statement $3,000

    Explanation:

    Notes payable amount $ 50,000.00

    1 year interest @8% (50000 x 8%) $ 4,000.00

    Less: Interest for 2019 for 3 months (4000/12*3) $ 1,000.00

    Interest expense for 2020 $ 3,000.00
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