Use the Following Information for Questions 44-46

question 90

Multiple Choice

Use the following information for questions 44-46.
On December 31, 2020, Diaz Corp. is in financial difficulty and cannot pay a $ 900,000 note with $ 90,000 accrued interest payable to Cameron Ltd., which is now due. Cameron agrees to accept from Diaz equipment that has a fair value of $ 435,000, an original cost of $ 720,000, and accumulated depreciation of $ 345,000. Cameron also forgives the accrued interest, extends the maturity date to December 31, 2022, reduces the face amount of the note to $ 375,000, and reduces the market interest rate of 6%, with interest payable at the end of each year.
-Diaz should record interest expense for 2020 of

• A) $ 0.
• B) $ 22,500.
• C) $ 45,000.
• D) $ 67,500.

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Definitions:

12-Gauge

A term commonly referring to the caliber of a shotgun, based on the number of lead balls of size equal to the shotgun's bore that can be made from one pound of lead.

Copper Wire

A type of electrical conductor made of copper, used in wiring for its excellent conductivity.

Acres

A unit of land area used in the imperial and US customary systems, equal to 43,560 square feet, or about 4047 square meters.

Cleaned

The state or condition of being free from dirt, contaminants, or impurities after undergoing a cleaning process.