Loeb Corp. frequently borrows from the bank in order to maintain sufficient operating cash. The following loans were at a 12% interest rate, with interest payable maturity.

Loeb repaid each loan on its scheduled maturity date.

Date of loan Amount Maturity date Term of loan 11/1/10 $ 5,000 10/31/11 1 year 2/1/11 15,000 7/31/11 6 months 5/1/11 8,000 1/31/12 9 months Loeb records interest expense when the loans are repaid. As a result, interest expense of $1,500 was recorded in 2011. If no correction is made, by what amount would 2011 interest expense be understated?

a. $540

b. $620

c. $640

d. $720