Kieso Company borrowed $750,000 on a 180-day note at 13 percent interest. The mo

Question

Kieso Company borrowed $750,000 on a 180-day note at 13 percent interest. The money was borrowed for 30 days in 2014 and 150 days in 2015; the note and interest were to be paid upon maturity in 2015. (Assume 360 days in a year.)

How much interest expense, if any, would be reported in 2014 and in 2015?

Kieso Company borrowed $750,000 on a 180-day note at 13 percent interest. The money was borrowed for 30 days in 2014 and 150 days in 2015; the note and interest were to be paid upon maturity in 2015. (Assume 360 days in a year.)

Explanation / Answer

30 days interest will be reported in 2014 and 150 days interest will be reported in 2015.

So for 2014 Interest will be :

=$750,000*13%*30/365=$ 8013.70

So interest of $8,013.70 will be reported in 2014

For 2015 interest will be;

=$750,000*13%*150/365=$40,068.50

So, $40,068.50 will be reported as interest in 2015

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