Comet Corporation's liability account balances at June 30,2013,included a 10 percent note payable.The note is dated October 1,2011,and carried an original principal amount of $600,000.The note is payable in three equal annual payments of $200,000 plus interest.The first interest and principal payment was made on October 1,2012.In Comet's June 30,2013,balance sheet,what amount should be reported as Interest Payable for this note?
A) $10,000
B) $15,000
C) $30,000
D) $45,000

Question

Quizplus · Accepted Answer

Interest payable is calculated on the remaining principal amount after the first payment. After the first payment of $200,000, the remaining principal is $400,000. The interest for one year on $400,000 at 10% is $40,000. Since the interest is payable annually and the balance sheet date is June 30, 2013, nine months of interest has accrued since the last payment on October 1, 2012. Therefore, the interest payable is $400,000 * 10% * 9/12 = $30,000.

Comet Corporation's Liability Account Balances at June 30,2013,included a 10