The most appropriate choice among the given options would be:
d) The note payable, dated August 1, specifies that Charger borrowed $62,500 at an 8% interest rate, with both interest and principal due on March 31 of the following year.
Which best address the scenario
Let's dive into a more detailed explanation of the loan agreement described in option d):
The note payable is a legal document that outlines the terms and conditions of a loan. In this case, Charger borrowed $62,500 on August 1. The note specifies an 8% interest rate, which means Charger will need to pay interest on the borrowed amount.
The interest and principal are both due on March 31 of the following year. This means that Charger has a specific timeframe within which they need to repay the loan. The principal refers to the original amount borrowed ($62,500), while the interest is the additional amount charged for borrowing the money.
With an 8% interest rate, Charger will need to calculate the interest owed based on the principal amount and the duration of the loan. Typically, the interest is calculated annually, so Charger would need to determine the interest for the period from August 1 to March 31 (approximately 8 months).
On the due date, March 31 of the following year, Charger is obligated to repay both the principal amount borrowed ($62,500) and the interest accrued over the specified period.