Multiple Choice
The common management saying, "what you measure is what you get," signals the importance of:
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1. Introduction to Accounting
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Assume a company issues a 90-day, 8% note payable for $10,000. Using a 360-day year, what is the amount of interest expense that should be recorded at maturity?
A
$220
B
$200
C
$180
D
$240
Verified step by step guidance1
Step 1: Understand the formula for calculating interest expense. The formula is: Interest Expense = Principal × Rate × Time.
Step 2: Identify the values provided in the problem. The principal is $10,000, the annual interest rate is 8% (or 0.08 as a decimal), and the time period is 90 days.
Step 3: Convert the time period into a fraction of a year using the 360-day year assumption. The fraction is calculated as: Time = 90 ÷ 360.
Step 4: Substitute the values into the formula. Using MathML, the formula becomes: . Specifically: .
Step 5: Perform the multiplication and division to calculate the interest expense. This will give the amount of interest to be recorded at maturity.
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