Question

On September 1, 2014, Lowe Co. issued a note payable to the National Bank for $900,000 at 9% interest, payable in 3 equal annual principal payments of $300,000. The interest and principal payment was due on September 1, 2015. At December 31, 2015, what is the accrued interest payable?

A. $27,000
B. $24,000
C. $18,000
D. $16,000

Answer 1

The accrued interest payable at December 31, 2015, is $24,000.

Step-by-step explanation:

To calculate the accrued interest payable at December 31, 2015, we need to determine the amount of time that has passed since September 1, 2015. From September 1 to December 31, there are 4 months. The interest rate on the note payable is 9%. Thus, we can calculate the accrued interest as follows:

Accrued Interest = Principal amount × Interest rate × Time

Accrued Interest = $900,000 × 9% × (4/12) = $24,000