On October 1, Pembroke Inc. (a cash-basis, calendar-year corporation) borrows $60,000 from the bank at 12 percent annual interest. On December 30, Pembroke pays $7,200 to the bank for the first year’s interest on the loan. How much can Pembroke deduct for interest expense in the current year?
a. 0
b. $600
c. $1,800
d. $5,400
e. $7,200
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