Allen Inc.took out a 1-year,8%,$100,000 loan on March 31,2018.Interest is due upon maturity of the loan.The loan and interest must be paid back on March 31,2019.As of December 31,2018,what amount,if any,should Allen Inc.report for interest payable?

Question

Quizplus · Accepted Answer

There are 9 months between March 31, 2018 and December 31, 2018. Therefore, Allen Inc. has accrued interest expense for 9 months: 
($100,000 × 0.08) × (9/12) = $6,000 
This means that as of December 31, 2018, Allen Inc. owes $6,000 in interest payable, which should be reported on the balance sheet as a current liability.

Allen IncTook Out a 1-Year,8%,$100,000 Loan on March 31,2018