Question

On August 1, 2019, Jason Company borrowed $40,000 from a bank on a 12%, 8-month note...

On August 1, 2019, Jason Company borrowed $40,000 from a
bank on a 12%, 8-month note payable. On June 1, 2020,
Jason Company borrowed $36,000 from a bank on a 12%,
10-month note payable.

Calculate the total amount of interest expense reported
by Jason Company in its 2020 income statement related to
these two loans.
Business   Accounting   
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Homework Answers

Answer #1

Answer: $3,720

.

.

Loan term

(In months)		 Number of months related to loan in 2019 Number of months related to loan in 2020 Number of months related to loan in 2020 Interest to be reported in 2019 Interest to be reported in 2020 Interest to be reported in 2021
Loan taken on August 1, 2019 8

5

(August 1, 2019 to December 31, 2019)

3

(January 1, 2020 to March 31, 2020)

 -

$2,000

[$40,000 x 12% x (5 months / 12 months)

$1,200

[$40,000 x 12% x (3 months / 12 months)

 -
Loan taken on June 1, 2020 10 -

7

(June 1, 2020 to December 31, 2020)

3

(January 1, 2021 to March 31, 2021)

 -

$2,520

[$36,000 x 12% x (7 months / 12 months)

$1,080

[$36,000 x 12% x (3 months / 12 months)
Total interest to be reported in the respetive year

$2,000

 $3,720 $1,080
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