On November 1,2018,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 1,2019.The Bagel Factory should report interest payable at December 31,2018,in the amount of:
A)$0.
B)$1,000.
C)$2,000.

Question

Quizplus · Accepted Answer

The interest on the note payable is calculated using the formula:

Interest = Principal x Rate x Time

Where, Principal = $100,000, Rate = 6%, and Time = 2/12 (two months out of a total of 6 months)

Therefore,
Interest = $100,000 x 6% x 2/12
Interest = $1,000

So, as of December 31, 2018, The Bagel Factory should report interest payable of $1,000.

On November 1,2018,The Bagel Factory Signed a $100,000,6%,six-Month Note Payable