1. Sierra Computer Services received a 6-month, 12% note from Wells Fargo for $6

Question

1.      Sierra Computer Services received a 6-month, 12% note from Wells Fargo for $63,200 on September 1, 2016. The note will be due on February 28, 2017. Assuming that the company’s accounting period ends on December 31 each year, how much interest expense should be recorded during 2016 and 2017?
2016                                                              2017
a. $2,528                                                      $1,264

b. $5,056                                                      $2,528

c. $7,584                                                      $0

d. $3,792                                                      $3,792

Explanation / Answer

Interest expense during 2016=63200*12%/12*4= $2528 Interest expense during 2017=63200*12%/12*2= $1264 Option A is correct

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