Final answer:
D. $3,383. The accrued interest on the 10% note for 7 months is $3,383, after calculating using the interest formula with the principal amount, the annual interest rate, and the proportion of the year that has passed.
Step-by-step explanation:
The issue involves calculating the accrued interest on a note payable by Lennon Company. Being a 10% note with a principal of $58,000 signed on June 1, 2019, we need to find out how much interest has accrued by December 31, 2019. The time frame from June 1 to December 31 is 7 months. The interest formula I = PRT (Interest = Principal x Rate x Time), when expressed annually, requires time in years. Therefore, we convert the 7 months into years (7/12 years).To calculate the amount of interest to be accrued on December 31, 2019, we need to find the interest for the remaining 7 months. The formula to calculate interest is:
Interest = Principal * Rate * Time
Given that the principal is $58,000, the rate is 10%, and the time is 7/12 (7 months out of 12), we can plug in these values to find the interest:
Interest = $58,000 * 0.10 * (7/12) = $2,900
Therefore, the amount of interest to be accrued on December 31, 2019, is $2,900. So the correct answer is A. $2,900.
We calculate the interest as follows:
I = $58,000 x 10% x (7/12)
I = $58,000 x 0.10 x 0.5833
I = $3,383 (rounded to the nearest dollar)
Therefore, the correct answer is D. $3,383.