Question

on september 1, 2022, dan loaned $100,000 to laker pizza, llc to finance acquisition of equipment for the llc's new restaurant. laker pizza is required to repay the principal plus accrued interest on december 31, 2023. the loan's annual interest rate is 6%. what interest payable should laker pizza record on its december 31, 2022 balance sheet in conjunction with this loan?

Answer 1

Laker Pizza should record $2,000 as the interest payable on its balance sheet for the $100,000 loan at 6% annual interest from September 1 to December 31, 2022, representing the interest accrued over the 4-month period.

Step-by-step explanation:

The question is asking how much interest payable Laker Pizza should record on its balance sheet for the loan it took from Dan on September 1, 2022, to be repaid with interest by December 31, 2023, with an annual interest rate of 6%. To calculate the interest payable for the year ending December 31, 2022, we use the formula Interest = Principal × Rate × Time, where Principal is $100,000, Rate is 6% (or 0.06 as a decimal), and Time is the proportion of the year the loan has been outstanding. From September 1 to December 31 is 4 months, so Time is 4/12 of a year.

Calculating this, the interest for 2022 is $100,000 × 0.06 × (4/12), which equals $2,000. Therefore, Laker Pizza should record $2,000 as interest payable on its balance sheet for the loan as of December 31, 2022.