Question

On May 1st, 2017, Wilco borrows $275,000 by issuing a note payable. The note is due in one year and has at 15% interest rate. What is the amount of interest expense Wilco will report on the income statement in 2017?

Answer 1

• Working

A	Amount borrowed	$            2,75,000.00
B	Annual Interest rate	15%
C=A x B	12 month Interest	$                41,250.00
D	Borrowed on	01-May-17
E	No. of months till Dec 2017	8 months
F = C x (8/12)months	Interest expense for 8 months	$                27,500.00

• Hence, amount of Interest expense Wilco will report in Income Statement for 2017 = $ 27,500