Oriole Company borrowed $403,000 on April 1. The note requires interest at 12% and principal to be paid in one year. How much interest is recognized for the period from April 1 to December 31?
Note payable is recorded as a liability for a company. It may recorded as a long-term liability or a short-term liability which depends on the maturity period of the note payable.
Answer and Explanation:
The correct answer is option (b).
The interest of $32,240 would be recognized for the period from April 1 to December 31.
Explanation: The interest of $32,240 ($403,000 x 12% x 8/12) would be recognized for the period from April 1 to December 31.
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from Financial Accounting: Help and ReviewChapter 5 / Lesson 18