The note payable relating to the June 2, and 10 transactions is a five-year note, with interest at the rate of 12 percent annually. Interest expense should be computed based on a 360 day year.

[IMPORTANT NOTE: The original note on the computer equipment purchased on June 2 was $ 1 20,000. On June 10, eight days later, $23,000 was repaid. Interest expense must be calculated on the $ 120,000 for eight days. In addition, interest expense on the $97,000 balance of the loan ($ 1 20,000 less $23,000 = $97,000) must be calculated for the 20 days remaining in the month of June. ]