Valix Finacc vol 2 Problem 1-13

Financial Accounting Volume 2 2008 Valix-Peralta
Chapter 1 Problem 1-13

Problem 1-13 Answer  A

January 1 – October 31, 2008 (500,000 x 12% x 10/12)                                           50,000

February 1 – July 31, 2008 (1,500,000 x 12% x 6/12)                                                  90,000

May 1 – December 31, 2008 (800,000 x 12% x 8/12)                                               64,000

Total interest expense of 2008                                                                                 204,000

Less: Recorded interest expense                                                                            150,000

Understatement of interest expense                                           54,000