Question

Allen Inc. took out a 1-year, 8%, $100,000 loan on March 31, 2018. Interest is due upon maturity of the loan. The loan and interest must be paid back on March 31, 2019. As of December 31, 2018, what amount, if any, should Allen Inc. report for interest payable?

Answer 1

Answer:

$6000

Explanation:

Data provided in the question :

Interest rate = $100,000

Duration = March 31, 2018 to December 31, 2018  

i.e 9 months

or

$\frac{\textup{9}}{\textup{12}}$ years

Now,

The interest is calculated as:

Interest = Principle × Rate × Time

or

Interest =  $100,000 × 0.08 × $\frac{\textup{9}}{\textup{12}}$

or

Interest = $6,000

Therefore,

The interest reported by the Allen Inc. report on December 31, 2018 will be $6000

Answer 2

Answer:

$6,000

Explanation:

Given:

Loan amount = $100,000

Interest rate = 8% or 0.08

Loan was taken on March 31 2018. Interest is payable on March 31 2019. Interest due as on December 31 2018 is for 9 months.

Calculation of interest payable as on December 31 2018:

Interest due = $100,000\times0.08\times\frac{9}{12}$

                     = $6,000

Therefore, Allen Inc. will report $6,000 interest payable as on December 31 2018.