exercise 11-5 (algo) interest - bearing notes payable with year - end adjustments lo\nkeesha company borrows…

exercise 11-5 (algo) interest - bearing notes payable with year - end adjustments lo\nkeesha company borrows $215,000 cash on december 1 of the current year by signing a 120 - day, 11%, $2\ncomplete this question by entering your answers in the tabs below.\nreq 1 req 2 and 3 req 4\nwhat is the amount of interest expense in the current year and the following year from this note?\nnote: use 360 days a year. do not round intermediate calculations and round final answers to the nearest whole\n\n| | total through maturity | interest expense current year | interest expense following year |\n|--|--|--|--|\n| principal | $ 215,000 | $ 215,000 | $ 215,000 |\n| rate (%) | 11% | 11% | 11% |\n| time | 120/360 | 30/360 | 90/360 |\n| total interest | $ 7,883 | $ 1,970 | $ 5,912 |\nprevious req 4

exercise 11-5 (algo) interest - bearing notes payable with year - end adjustments lo\nkeesha company borrows $215,000 cash on december 1 of the current year by signing a 120 - day, 11%, $2\ncomplete this question by entering your answers in the tabs below.\nreq 1 req 2 and 3 req 4\nwhat is the amount of interest expense in the current year and the following year from this note?\nnote: use 360 days a year. do not round intermediate calculations and round final answers to the nearest whole\n\n| | total through maturity | interest expense current year | interest expense following year |\n|--|--|--|--|\n| principal | $ 215,000 | $ 215,000 | $ 215,000 |\n| rate (%) | 11% | 11% | 11% |\n| time | 120/360 | 30/360 | 90/360 |\n| total interest | $ 7,883 | $ 1,970 | $ 5,912 |\nprevious req 4

Answer

Explanation:

Step1: Calculate total interest through maturity

The formula for simple - interest is $I = P\times r\times t$, where $P$ is the principal amount, $r$ is the annual interest rate, and $t$ is the time in years. Here, $P=$215000$, $r = 0.11$, and $t=\frac{120}{360}$. So, $I_{total}=215000\times0.11\times\frac{120}{360}\approx$7883$.

Step2: Calculate current - year interest

The note was signed on December 1. In the current year, the time $t_{1}=\frac{30}{360}$ (December has 30 days in a 360 - day year). Using the simple - interest formula $I = P\times r\times t$, with $P = 215000$, $r=0.11$, and $t=\frac{30}{360}$, we get $I_{current}=215000\times0.11\times\frac{30}{360}\approx$1970$.

Step3: Calculate following - year interest

The time in the following year $t_{2}=\frac{90}{360}$ (since the total note period is 120 days and 30 days are in the current year). Using the simple - interest formula $I = P\times r\times t$, with $P = 215000$, $r = 0.11$, and $t=\frac{90}{360}$, we get $I_{following}=215000\times0.11\times\frac{90}{360}\approx$5912$.

Answer:

Total through maturity: $$7883$ Interest Expense Current Year: $$1970$ Interest Expense Following Year: $$5912$