On August 1, Year 1, Jackson Company issued a one-year $80,000 face value interest-bearing note with a stated interest rate of 9% to Galaxy Bank. Jackson accrues interest expense on December 31, Year 1, its calendar year-end.

What is the amount of interest expense and the cash outflow for interest during the year ending December 31, Year 1?

Interest Expense

Cash Outflow

Multiple Choice

• $7,200

  $7,200

• $7,200

  $0

• $3,000

  $0

• $3,000

  $3,000