Question

Universal Travel Inc. borrowed $495,000 on November 1, 2018, and signed a twelve-month note bearing interest at 6%. Principal and interest are payable in full at maturity on October 31, 2019. In connection with this note, Universal Travel, Inc. should report interest payable at December 31, 2018, in the amount of (Do not round your intermediate calculations):

Answer 1

4.950

Explanation:

6% is the interest for 12 months

From November 1 to December 31 are 2 months, and for 2 months interest we calculate as follows :

2* (6 /12) = 1% --> this interest rate is calculated according to the period of time displayed.

The interest payable = 495.000 * 0.01 = 4.950

The interest payable = 495.000 * 0.01 = 4.950