Question

Clayton Company borrowed $6,000 from the State Bank on April 1, Year 1. The one-year note carried a 6% rate of interest. The loan and interest were paid when the note matured. What amount of Interest Payable should appear on Clayton's Year 2 Balance Sheet

Answer 1

Since Clayton Company's loan and interest were paid upon maturity of the note, there would be no interest payable recorded in Year 2. The correct amount is $0.

Step-by-step explanation:

The student is asking about the amount of interest payable that should appear on Clayton's Year 2 Balance Sheet after borrowing $6,000 at a 6% interest rate for one year. The calculation for the interest is straightforward: the principal amount ($6,000) multiplied by the interest rate (6%) multiplied by the time period (1 year), which equals $360. Since the question states that the loan and interest were paid when the note matured, there should be no interest payable on Clayton's Year 2 Balance Sheet. Essentially, the balance for interest payable should be $0 because the debt has been settled.