On june 1, 2016, oakcrest company signed a three-year $110,000 note payable with 9 percent interest. interest is due on june 1 of each year beginning in 2017. what amount of interest expense should be reported on the income statement for the year ended december 31, 2016?

Interest expense recognized as for year ending December 31, 2016 is $5,775

Explanation:

Given:

Note payable amount = $110,000

Interest rate = 9% or 0.09

Notes payable was issued on 1st June 2016. Interest is payable every year for 3 years on June 1.

Interest due as on December 31, 2016 will be pertaining to 7 months (June - December) as interest is recognized in the income statement as it is incurred irrespective of when it is paid. Calculation of interest recognized as on December 31 2016:

Interest recognized =

                                 = $5,775

Therefore, $5,775 interest amount is reported on the income statement for the year ending December 31 2016.