Question

On September 1, 2017, Bonita Industries issued a note payable to Fidelity Bank in the amount of $2710000, bearing On this date, the bank's prime rate was 10%. The first payment for interest and principal was made on September 1, 2018. At Dece interest at 9%, and payable in three equal annual principal payments of $895000. mber 31, 2018, Bonita should record accrued interest payable of a. $54450. b. $ 80550. c. $181500. d. $ 89500.

Answer 1

a. $54450

Step-by-step explanation:

principal - 2018 installment = balance

2,710,000 - 895,000 = 1,815,000

From this amoutn we solve for the accrued interest from Sep 1st 2018 to Dec 31th 2018

outstanding principal x rate x time = interest

1,815,000 x 0.09 x 4/12 = 54.450‬

we should make the point that rate and tiem should be expresses in the same metric as the rate is annual we express time in portion of a year.