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In September 1, 2018, Poo Lonheimer borrowed $100,000 from The Actors' Credit Union and signed a...

In September 1, 2018, Poo Lonheimer borrowed $100,000 from The Actors' Credit Union and signed a 6% one-year note payable with all interest and principal due at maturity. The interest on this loan is stated separately. The interest expense Lonheimer will recognize on this note in 2019 is __________

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Answer #1

Note payable was issued on September 1, 2018

Interest rate = 6%

Time period = 1 year

Interest expense will be recorded for 4 months in 2018, From September to December.

In the year 2019, interest expense will be recognized for 8 months i.e from January 1 to September 1, 2019.

Interest expense in 2019 = Note payable x Interest rate x Time period

= 100,000 x 6% x 8/12

= $4,000

The interest expense Lonheimer will recognize on this note in 2019 is $4,000.

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