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1 September, 23:46

2. Jamal borrowed $100,000 on July 1, 2018, and signed a four-year note bearing interest at 8%. Interest is payable in full at maturity on June 30, 2020. Jamal should report interest expense at December 31, 2018, of: a. $0 b. $4,000 c. $8,000 d. $32,000

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  1. 2 September, 00:05
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    b. $4,000

    Explanation:

    Amount of Loan = $100,000

    Interest rate = 8% per year

    Interest rate = 8% x (6 / 12)

    Interest rate = 4% every six months

    On December 31 six months has been passed after issuance.

    Interest Expense = $100,000 x 4%

    Interest Expense = $4,000

    Jamal should report $4,000 as interest expense. So correct answer is b. $4,000.
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