How did they calculate this interest expense? - Discussion Forum

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How did they calculate this interest expense?

2008-06-13, 8:54 PM #1

silent_killa

Senior Memba

Posts: 665

Borrowed $18,000 from HSBC bank on a three-month, 6% note. Interest is payable monthly on the 15th of each month.

The answer says this:

Jan. 31 Interest Expense ($18,000 x 6% x 0.5/12) 45
Interest Payable........................................................ 45

Where is the .5 coming from? It is making me so confused right now :saddowns:

\(='_'=)/

2008-06-13, 8:58 PM #2

Ford

Not Suitable for Motor Vehicles

Posts: 4,265

looks like interest is payable bi monthly. the 15th and last day of the month.

My girlfriend paid a lot of money for that tv; I want to watch ALL OF IT. - JM

2008-06-13, 9:34 PM #3

silent_killa

Senior Memba

Posts: 665

Thanks ford. You gave me an idea. I actually stupidly left out that they borrowed the loan on the 15th. It didnt occur to me that I had to count it on that day as well.

Thanks again!

\(='_'=)/