On October 1 2021 Sunset & Vine Wine Shoppe borrows $150000 from the High Country Bank on a 3-month $150000 4% note.Use the following tabular analysis to record the payment of the note and accrued interest on January 1 2022:

Question

Quizplus · Accepted Answer

When the note is paid, the Notes Payable account will decrease by the principal amount borrowed, which is $150,000. Additionally, accrued interest on the note will also need to be paid, which is calculated as follows:

Interest = Principal x Rate x Time 
Interest = $150,000 x 4% x (3/12) 
Interest = $1,500

Therefore, the Interest Payable account will decrease by $1,500, and both the Notes Payable and Interest Payable accounts will be credited. Finally, the payment will be made in cash, so the Cash account will decrease by $151,500. This is reflected in option B.

On October 1 2021 Sunset & Vine Wine Shoppe Borrows