On September 1, 2010, Star Corp. issued a note payable to Federal Bank in the amount of $450,000. The note had an interest rate of 12 percent and called for three equal annual principal payments of $150,000. The first payment for interest and principal was made on September 1, 2011. At December 31, 2011, Star should record accrued interest payable of

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Since the note was issued on September 1, 2010, interest for four months (September through December) needs to be accrued at the end of 2011. The interest payment for one year would be $54,000 ($450,000 × 12%). Therefore, the interest payment for four months would be $18,000 ($54,000/3 × 4/12). And half of this amount would be the accrued interest payable at the end of 2011, which is $9,000. However, since the first payment for interest and principal was made on September 1, 2011, Star Corp. would have already paid $6,000 ($18,000/3 × 1/12) of this interest. Thus, Star Corp. should record accrued interest payable of $12,000 ($9,000 - $6,000) at the end of 2011.