Question

On November 1, 2021, NoleCo signed a $100,000, 6%, six-month note payable with the amount borrowed plus accrued interest due six months later on May 1, 2022. NoleCo records the appropriate adjusting entry for the note on December 31, 2021. In recording the payment of the note plus accrued interest at maturity on May 1, 2022, NoleCo would:

Answer 1

amount of cash needed to pay back the note payable plus any accrued interest on May 1, 2022 is $103000

Step-by-step explanation:

Accrued interest is the interest that have been gained by a company but have not been paid as of the date the balance sheet was entered, this is usually reported in account Interest Payable. Notes Payable is shows the amount of principal owed as of when the balance sheet entry was recorded while the Interest Payable shows the amount of interest that a company owes as of the balance sheet date.

Given that the number of months n = 6 months = 6 / 12 years.

amount of cash needed to pay back the note payable plus any accrued interest on May 1, 2022 = $100000 + ($100000 × 6% × 6/12 year) = $103000