Abardeen Corporation borrowed $90,000 from the bank on October 1, 2016. The note

Question

Abardeen Corporation borrowed $90,000 from the bank on October 1, 2016. The note had an 8 percent annual rate of interest and matured on March 31, 2017. Interest and principal were paid in cash on the maturity date.

A.What amount of cash did Abardeen pay for interest in 2016?

B. What amount of interest expense was recognized on the 2016 income statement?

C.What amount of total liabilities was reported on the December 31, 2016, balance sheet?

D.What total amount of cash was paid to the bank on March 31, 2017, for principal and interest?

E.What amount of interest expense was reported on the 2017 income statement?

Explanation / Answer

Amount Borrowed    90,000.00 Annual Interest   8% A) Time till 31 Dec 2016 3 Months Interest for 2016 = 90,000*8%*3/12      1,800.00 Interest of $1800 computed above was paid on 31 March 2017 b) Interest Expense        1,800.00 c) Notes Payable    90,000.00 Interest Expense Payable      1,800.00 Total Liab on 31 Dec 2016    91,800.00 d) Time till 31 Mar 2017 from 31 Dec 16 3 Months Interest for 2017 = 90,000*8%*3/12      1,800.00 Notes Payable    90,000.00 Interest Expense for 2016      1,800.00 Interest Expense for 2017      1,800.00 Total Cash Paid on 31 Mar 17    93,600.00 e) Interest Expense        1,800.00

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