Question

2. On December 1, a company accepted a $5,000, 4%, 90-day note. How much accrued interest will be recorded as an adjusting entry on December 31, the end of the accounting period?

A. $166.67B. $16.67C. $1.67D. $0.00; interest is not accrued at year-end

Answer 1

B. $16.67

Step-by-step explanation:

The computation of the accrued interest expense is shown below:

= Notes receivable or Principal × rate of interest × number of days ÷ (total number of days in a year)

= $5,000 × 4% × (30 days ÷ 360 days)

= $16.67

We assume there are 360 days in a year

And, the 30 days is calculated from December 1 to December 31

This is the answer and same is not mentioned in the given options