Question

On September 1, 2021, Daylight Donuts signed a $121,000, 10%, six-month note payable with the amount borrowed plus accrued interest due six months later on March 1, 2022. Daylight Donuts should report interest payable at December 31, 2021, in the amount of:

Answer 1

Answer:

Accrued interest as at December 31, 2021 = $4,033.33

Explanation:

Given,

Note payable = $121,000

Interest Rate = 10%

No. of months to be matured = 6 months

We know,

Simple interest = $121,000 x 10% x $\frac{6}{12}$

Simple interest = $6,050 at the time of maturity.

September 1, 2021 to December 31, 2021 = 4 months

Accrued interest payable as at December 31, 2021 = $6,050 x $\frac{4}{6}$

Accrued Interest payable = $4,033.33