On September 1, Year 1, Wiggins Company issued a $66,000 note payable that had a one-year term and an annual interest rate of 8%. What amount of interest expense will be recognized on the income statement for Year 1 and for Year 2, respectively?
What will be an ideal response?
$1,760 and $3,520
Year 1 (Sept. thru Dec.): $66,000 × 8% × (4 ÷ 12)= $1,760
Year 2 (Jan. thru Aug.): $66,000 × 8% × (8 ÷ 12) = $3,520
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