Question

Buttner Company borrows $88,500 on September 1, 2014, from Harrington State Bank by signing an $88,500, 12%, one-year note.

How much is accrued interest at December 31, 2014?A.) $2,655
B.) $10,620
C.) $3,540
D.) $4,425

Answer 1

C.) $3,540

Step-by-step explanation:

The loan borrowed is the Principal = $88,500

Interest rate per year = 12% or 0.012 as a decimal

Interest accrued formula = Principal * rate * time

Note: time will be from Sep1 - Dec 31 = 4 months or
`(4)/(12)`years

Interest accrued = 88,500 * 0.012 *
`(4)/(12)`

Interest accrued = 3,540

Therefore, as of December 31st, 2014, $3,540 would be the interest accrued hence choice C is correct.