Thurston Company started its business on January 1, Year 1 by issuing $15,000 of common stock. On March 1, Thurston issued a $27,000, 6% five-year note to Community Bank. Customers paid Thurston $54,000 for services performed in Year 1. The company paid $33,000 for operating expenses, and paid a $900 dividend to the stockholders. At year-end, Thurston recognized interest expense on the note.Required:a) What is the amount of interest expense Thurston will recognize in Year 1?b) What is the net income for Year 1?
What will be an ideal response?
a) $1,350
b) $19,650
a) Year 1 Interest expense = Principal of $27,000 × 6% × 10/12 = $1,350
b) Net income = $54,000 ? ($33,000 + + $1,350) = $19,650
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