Answer:
Option (B) is correct.
Explanation:
Given that,
Borrowed amount by west company from valley bank = $50,000
Interest is paid annually = 6% per year
Time period = From 1st September to 31st December
= 4 months
The note issued by West carried an 18-month term.
Therefore,
Interest expense = Principal amount × Rate × Time period
= $50,000 × 6% × (4 ÷ 12)
= $50,000 × 0.06 × (1 ÷ 3)
= $1,000
Therefore, the amount of interest expense that will be reported on West's income statement for Year 1 is $1,000.
