On November 1, 2014, Chancellor Co.borrowed $80,000 from State Bank and signed a 12%, six-month note payable, all due at maturity.The interest on this loan is stated separately.At December 31, 2014, Chancellor Co.'s overall liability for this loan amounts to:

Question

Quizplus · Accepted Answer

The formula to calculate the interest on a note payable is: 
Interest = Principal x Annual Interest Rate x Time
In this case, Principal = $80,000, Annual Interest Rate = 12%, and Time = 2/12 (since there are 2 months left until maturity from December 31). 
Interest = $80,000 x 0.12 x (2/12) = $1,280
Therefore, the total liability for the loan at December 31, 2014 is: 
$80,000 (principal) + $1,280 (interest) = $81,600. Therefore, choice C is the correct answer.