On September 1, 2019, Culver Corp. issued a 9% note payable to National Bank for $ 750,000, payable in three equal annual principal payments of $ 250,000, plus interest. On this date, the bank's prime rate was 8%. The first payment for interest and principal was made on September 1, 2020. At December 31, 2020, Culver should record accrued interest payable of

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The accrued interest payable by December 31, 2020, is calculated on the remaining principal after the first payment. After the first payment on September 1, 2020, the principal is reduced to $500,000 ($750,000 - $250,000). The interest for one year on the remaining principal at 9% would be $45,000 ($500,000 * 9%). However, the accrued interest payable by December 31, 2020, is for only 4 months (September to December), which is one-third of a year. Therefore, the accrued interest is one-third of $45,000, which is $15,000.