[The following information applies to the questions displayed below.]
On September 1,2018,Select Company borrowed $600,000 from a bank and signed a 12%,six-month note payable,with interest on the note due at maturity.
-The total amount of the current liability (including interest payable)for this loan that appears in Select Company's balance sheet at December 31,2018,is:
A)$600,000.
B)$624,000.
C)$636,000.
D)$672,000.

Question

Quizplus · Accepted Answer

The total amount of the current liability includes the principal amount of $600,000 plus the interest for four months (September to December). The annual interest rate is 12%, so the monthly interest rate is 1% (12% divided by 12 months). Therefore, the interest for four months is $600,000 * 1% * 4 = $24,000. Adding the interest to the principal amount gives $600,000 + $24,000 = $624,000.

[The Following Information Applies to the Questions Displayed Below