Question

Sodium Inc. borrowed $280,000 on April 1. The note requires interest at 12% and principal to be paid in one year.

How much interest is recognized for the period from April 1 to December 31?
a. $0.
b. $33,600.
c. $8,400.
d. $25,200.

Answer 1

Answer:

option (d) $25,200

Explanation:

Data provided in the question:

Amount borrowed = $280,000

Annual interest rate = 12% = 0.12

Interest period = April 1 to December 31 i.e 9 months

or

= 9 ÷ 12 = 0.75 year

Therefore,

Interest for the period from April 1 to December 31

= Amount borrowed × Interest rate × Time period

= $280,000 × 0.12 × 0.75

= $25,200

Hence,

The answer is option (d) $25,200