West Company borrowed $10,000 on September 1, Year 1 from the Valley Bank. West agreed to pay interest annually at the rate of 6% per year. The note issued by West carried an 18-month term. Based on this information the amount of interest expense appearing on West's Year 1 income statement would be:

a. $0.

b. $234

c. $585

d. $780

The correct answer is $200

Explanation:

The interest expense appearing on the company's income statement in year 1 is for a period of four months (September to December) year 1.

The interest expense using an annual rate of 6% is computed thus:

interest expense=$10,000*6%*4/12=$200

The correct option is $200 which is not one of the options provided, hence the options need.

In another version of the question, option D was $200 which shows is missing here,

All in all, the correct answer is $200 interest for a period of four months from September to December