new tech Corporation borrow $20,000 from the bank on March 1st 2017. Then no. A

Question

new tech Corporation borrow $20,000 from the bank on March 1st 2017. Then no. A 9% annual interest rate in a one year turn to assurity. the company paid the principal and the interest in cash on the maturity date. what amount of interest expense new tech Corporation showing its 2017-2018 income statements?

QUESTION 1 New-Tech Corporation borrowed $20,000 from the bank on March 1, 2017. The note carried a 9% annual interest rate and a 1-year term to maturity. The company paid the principal and the interest in cash on the maturity date. What amount of interest expense will New-Tech Corporation show on its 2017 and 2018 income statements? 1, 2017 $1,800 $300 $450 $1.350 a A QUESTION 2

Explanation / Answer

The answer is C i.e., $ 1500 in 2017 & 300 in 2018

As loan was taken on 01.03.2017, so interest accrues for 10 months from March to December in 2017

Interest expense in 2017 = 20000*9%*10/12 = $1500

Similarily in 2018 interest expense accrues for 2 months i.e., Jan & Feb

So Interest Expense in 2018 = 20000*9% *2/12 = $ 300

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