Sonic Mart borrows $100,000 on July 1 with a short-term loan that has an annual interest rate of 5% which is payable in three months.
What will Sonic Mart need to accrue on August 31, assuming that no accrual has yet been made?

Question

Quizplus · Accepted Answer

Interest for two months on a $100,000 loan at an annual rate of 5% is calculated as $100,000 * 5% * (2/12) = $833.33. This amount increases liabilities (interest payable) and increases expenses (interest expense).

Sonic Mart Borrows $100,000 on July 1 with a Short-Term