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Oriole Company borrowed $403,000 on April 1. The note requires interest at 12% and principal to...

Question:

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?

a. $0.

b. $32,240.

c. $36,270.

d. $48,360.

Note Payable:

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.


Learn more about this topic:

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How to Calculate Interest Expense: Formula & Example

from Financial Accounting: Help and Review

Chapter 5 / Lesson 18
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