Question

On december 1, victoria company signed a 90-day, 7% note payable, with a face value of $15,600. what amount of interest expense is accrued at december 31 on the note? (use 360 days a year.)

Answer 1

15,600 x 7% x 30/360

= $91

Answer 2

The answer should be $91. 7% of $15,600 is $1092. (Divide 15600 by 100, then multiply the result by 7). Divide 1092 by 360, and you get a result of 3.03 for your "daily interest" accrual, as spread out over a 360 day year. Then multiply that amount (3.03) by the 30 days between the 1st and the 31st, and you get 91.