Norwood, Inc. signs a , %, sixmonth note dated November 1, 2018. The interest expense recorded for this note in 2018 will be . (Do not round any intermediate calculations, and round your final answer to the nearest dollar.)

Norwood Company

Norwood Company signs a $11,000, 8.5%, six-month note dated November 1, 2018. The interest expense recorded for this note in 2018 will be ___$156. (Do not round any intermediate calculations, and round your final answer to the nearest dollar.)

Explanation:

a) Data and Calculations:

Note Payable = $11,000

Interest rate = 8.5%

Interest expense for a year = 8.5% of $11,000 = $935

Interest expense for 2 months (from November to December) = $935/12 * 2 = $156

b) Interest expense represents the annual expense that must be incurred for the use of resources which the Norwood, Inc. obtained through the signing of the six month note.  Interest on notes are computed based on an annual basis unless otherwise stated.  The 8.5% is per annum.  So, when the interest and principal are being repaid in six month's time, Norwood, Inc. should have accrued interest for six months, which will amount to $467.