On November 1,2012,The Bagel Factory signed a $100,000,6%,six-month note payable with the amount borrowed plus accrued interest due six months later on May 1,2013.The Bagel Factory should report interest payable at December 31,2012,in the amount of:

Question

Quizplus · Accepted Answer

The note payable was signed on November 1 and the interest starts accruing from that date. Since December 31 is two months after the signing date, the interest payable would be for two months.

Interest payable =Principal amount x Interest rate x Time 
                 = $100,000 x 6% x (2/12) 
                 = $1,000

Therefore, the Bagel Factory should report interest payable of $1,000 on December 31, 2012.

On November 1,2012,The Bagel Factory Signed a $100,000,6%,six-Month Note Payable