Question

Universal Travel Inc. borrowed $498,000 on November 1, 2021, and signed a 12-month note bearing interest at 7%. Interest is payable in full at maturity on October 31, 2022. In connection with this note, Universal Travel Inc. should report interest payable at December 31, 2021, in the amount of

Answer 1

Answer: $2,905

Step-by-step explanation:

The total interest that will be paid on the note is:

= 498,000 * 7%

= $34,860

This interest will have to be apportioned monthly over the year. The monthly interest (which will also be the December interest) is:

= 34,860 / 12 months

= $2,905