Wiggins Company issued a $66,000, 8% note payable, with a one year term on September 1, Year 1. What amount of interest expense will be recognized on the income statement for Year 1? What amount of interest expense will be recognized on the income statement for Year 2?
What will be an ideal response?
Interest expense for Year 1 = $1,760
Interest expense for Year 2 = $3,520
Feedback:
Year 1: $66,000 × 8% × 4 months ÷ 12 months = $1,760 interest
Year 2: $66,000 × 8% × 8 months ÷ 12 months = $3,520 interest
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