Sodium Inc. borrowed $280,000 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?

a. $0.

b. $33,600.

c. $8,400.

d. $25,200.

option (d) $25,200

Explanation:

Data provided in the question:

Amount borrowed = $280,000

Annual interest rate = 12% = 0.12

Interest period = April 1 to December 31 i. e 9 months

or

= 9 : 12 = 0.75 year

Therefore,

Interest for the period from April 1 to December 31

= Amount borrowed * Interest rate * Time period

= $280,000 * 0.12 * 0.75

= $25,200

Hence,

The answer is option (d) $25,200