Question

6) On October 1, 2021, a company signed a $100,000, 6%, six-month note payable with the amount borrowed plus accrued interest due six months later on April 1, 2022. The company should report interest payable at December 31, 2021, in the amount of:

A) $500.

B) $1,000.

C) $1,500.

D) $2,000.

Answer 1

Date of note = October 1, 2021

Par value of note = $100,000

Interest rate = 6%

Time period up to December 31, 2021 = 3 months

Interest expense on December 31, 2021 = Par value of note x Interest rate x Time period up to December 31, 2021

= 100,000 x 6% x 3/12

= $1,500

Correct option is C.

The company should report interest payable at December 31, 2021, in the amount of $1,500.

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