Universal Travel Inc. borrowed $500,000 on November 1, 2009, and signed a 12-month note bearing interest at 6%. Interest is payable in full at maturity on October 31, 2010. In connection with this note, Universal Travel Inc. should report interest payable at December 31, 2009, in the amount of:

Question

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Since interest is payable in full at maturity, no interest expense or payable needs to be recorded until October 31, 2010. Therefore, as of December 31, 2009, there is no interest payable. The interest expense for the full year (November 1, 2009, through October 31, 2010) would be $30,000 (500,000 x 6% = 30,000), but it is not recognized until the end of the year.