**Question 2**On November 1, 2021, ABC Company borrowed $200,000 in cash by issuing a 4% one-year note payable. Payment of the note, plus interest, will be due on October 31, 2022. What is the amount of interest expense to be recorded for 2021?- **A** $4,000- **B** $1,333- **C** $2,666- **D** $8,000**Explanation:**To calculate the interest expense for 2021, we need to determine the interest for the portion of the year that the note was outstanding. The interest rate for the note is 4% per annum.1. Calculate the annual interest: \[ 200,000 \times 0.04 = 8,000 \] (This is the total interest for the entire year).2. Determine the period of time the interest applies to in 2021. Since the note was issued on November 1, 2021, and the accounting period closes on December 31, 2021, the note was outstanding for 2 months in 2021.3. Calculate the interest for these 2 months: \[ \left(\frac{2}{12}\right) \times 8,000 = \frac{16,000}{12} \approx 1,333 \]Therefore, the interest expense to be recorded for 2021 is **$1,333**.

Lets understand the basics. When amount if borrowed by signing notes payable then at the maturity…

Question 2 On November 1, 2021, ABC Company borrowed $200,000 in cash issuing a 4% one- year note payable. Payment of the note, plus interest, will be due on October 31, 2022. What is the amount of interest expense to be recorded for 2021?' I A) $4,000 $1,333 $2,666 $8,000

Question 2 On November 1, 2021, ABC Company borrowed $200,000 in cash issuing a 4% one- year note payable. Payment of the note, plus interest, will be due on October 31, 2022. What is the amount of interest expense to be recorded for 2021?' I A) $4,000 $1,333 $2,666 $8,000

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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