Craig borrowed $350,000 on October 1, 2014 and is required to pay $360,000 on March 1, 2015. What amount is the note payable recorded at on October 1, 2014 and how much interest is recognized from October 1 to December 31, 2014?
A) $350,000 and $0.
B) $350,000 and $6,000.
C) $360,000 and $0.
D) $350,000 and $10,000.

Question

Quizplus · Accepted Answer

The note payable is recorded at its face value of $350,000 on October 1, 2014. From October 1 to December 31, 2014, there are three months of interest (October, November, December), which can be calculated as:

$350,000 x 6% x (3/12) = $6,000

Therefore, the note payable is recorded at $350,000 and $6,000 of interest is recognized from October 1 to December 31, 2014.

Craig Borrowed $350,000 on October 1, 2014 and Is Required