Respuesta :
a) The amount of cash that Abardeenn Corporation paid for interest in year 1 is $0.
b) The amount of interest expense recognized on the year 1 income statement is $1,800 ($90,000 x 8% x 3/12).
c) The amount of total liabilities reported on the December 31, year 1 balance sheet is $91,800 ($90,000 + $1,800).
d) The total amount of cash paid to the bank on March 31, Year 2, for principal and interest is $93,600 ($90,000 + ($90,000 x 8% x 6/12).
e) The amount of interest expense reported on the year income statement is $1,800 ($90,000 x 8% x 3/12).
How is interest calculated?
Interest can be computed by applying the interest rate to the amount of notes payable based on the period under coverage.
For example, the interest amount for a six month is not the same as the interest amount for a full year, as interests are always prorated.
Data and Calculations:
Amount of Note Payable = $90,000
Annual interest rate = 8%
Maturity date = March 31, Year 2
Maturity period = 6 months
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