Question

Natalie is thinking of repaying all amounts outstanding to her grandmother. Recall that Cookie Creations borrowed $2,000 on November 16, 2023, from Natalie's grandmother. Interest on the note is 9% per year, and the note plus interest was to be repaid in 24 months. Recall that a monthly adjusting journal entry was prepared for the months of November 2023 (1/2 month), December 2023, and January 2024.

(a) Your answer is correct. Calculate the interest payable that was accrued and recorded up to January 31, 2024. (Round answer to 0 decimal places, e.g. 125.) Interest payable $

Answer 1

The interest payable accrued on Cookie Creations' $2,000 loan at 9% annual interest up to January 31, 2024, is $37 after rounding to 0 decimal places.

Step-by-step explanation:

To calculate the interest payable that was accrued and recorded up to January 31, 2024, on Cookie Creations' $2,000 loan from Natalie's grandmother, we use simple interest formula I = Prt, where 'P' is the principal amount ($2,000), 'r' is the annual interest rate (9% or 0.09 when expressed as a decimal), and 't' is the time in years.

Since the loan was taken on November 16, 2023, and we're calculating up to January 31, 2024, the time 't' is for 2.5 months (half of November, all of December and January).

First, convert the months into years by dividing the number of months by 12. Thus 2.5 months / 12 months per year = 0.2083 years (rounded to four decimal places for precision). Now, plugging the values into the formula, we get: Interest = $2,000 × 0.09 × 0.2083 = $37.49. No cents were recorded as per the instruction to round to 0 decimal places.

Therefore, the interest payable accrued up to January 31, 2024, is $37.