On October 1 Sam's Painting Service borrows $150000 from National Bank on a 3-month $150000 4% note.The payment of the note and accrued interest on January 1 by Sam's Painting Service includes a(n)

Question

Quizplus · Accepted Answer

The note was borrowed on October 1 and is due on January 1, which is a period of 3 months. The interest on the note can be calculated as:

Interest = Principal x Rate x Time
Interest = $150,000 x 0.04 x (3/12) = $1,500

Therefore, on January 1, Sam's Painting Service will need to repay the principal amount of $150,000 plus the accrued interest of $1,500 for a total of $151,500. This will result in a decrease in Notes Payable for $150,000 and a decrease in Interest Payable for $1,500, and a decrease in Cash for $151,500. Thus, choice B is the correct answer.

On October 1 Sam's Painting Service Borrows $150000 from National