OS Environmental provides cost-effective solutions for managing regulatory requi

Question

OS Environmental provides cost-effective solutions for managing regulatory requirements and environmental needs specific to the airline industry. Assume that on July 1 the company issues a one-year note for the amount of $4.9 million. Interest is payable at maturity. Required: Determine the amount of interest expense that should be recorded in a year-end adjusting entry under each of the following independent assumptions: (Enter your answers in dollars, not in millions (i.e. 5 should be entered as 5,000,000).) Interest Rate Filscal Year-End Interest Expense 2.1 11% | September 30 10% December 31 12% 6% 3.1 October 31 January 31

Explanation / Answer

the following is the required table along with notes:

formula = amount * interst rate * (number of months till fiscal year end) / 12 months.

in case 1 we have 6 months remaining till december

in case 2 we have 3 months till september end.

in case 3 we have 4 months till october end

in case 4 we have 7 months till january end.

Notes Interest rate Fiscal year end Interest expense ($4.9 million * 10%*6/12)=>0.245 million 10% December 31 $245,000 ($4..9 million * 11%*3/12)=>0.13475 millionn 11% september 30 $134,750 ($4.9 million * 12% * 4/12)=>0.196 million 12% October 31 $196,000 ($4.9 million * 6% * 7/12)=>0.1715 million 6% january 1 $171,500

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