Question

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:

Answer 1

$1,000

Step-by-step explanation:

The computation of the interest payable is shown below:

= Principal × rate of interest × number of months ÷ (given number of months in a year)

= $100,000 × 3% × (2 months ÷ 6 months)

= $1,000

The rate of interest would be half i.e 3% and the 2 months is computed from November 1 to December 31

And the 6 months is already given or from May 1 to November 1