Raceway Motors signed a $100,000, 6-month, 12% note payable on August 1, 2010. What is Raceway's total liability relative to this note payable at December 31, 2010?

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Quizplus · Accepted Answer

The total liability is the principal amount of the note plus the accrued interest. The accrued interest is calculated as follows:Accrued interest = Principal amount x Interest rate x TimeAccrued interest = $100,000 x 12% x 5/12Accrued interest = $5,000Therefore, the total liability at December 31, 2010 is $100,000 + $5,000 = $105,000.

Raceway Motors Signed a $100,000, 6-Month, 12% Note Payable on August