Question

On december 1, victoria company signed a 90-day, 6% note payable, with a face value of $15,000. what amount of interest expense is accrued at december 31 on the note?

Answer 1

To calculate the accrued interest:

Just multiply the interest rate by the balance to determine the annual interest expense. Divide the annual interest expense by 12 to calculate the amount of interest to record in a monthly adjusting entry.So fotr this problem, if a $15,000 note payable has a 6 percent interest rate, multiply 10 percent, or 0.06, by $15,000 to get $900 in annual interest. Divide $900 by 12 to get $75 in monthly interest.

Therefore, the accrued interest is $75.