Question

Qwest Communications International, Inc. borrowed $499,000 on November 1, 2021, and signed a 12-month note bearing interest at 8%. Interest is payable in full at maturity on October 31, 2022. Related to this note, Qwest should report interest payable at December 31, 2021, in the amount of: (Round your final answers to the nearest whole dollar.) Multiple Choice $39,920. $33,267. None of these answer choices are correct. $6,653. $26,613.

Answer 1

Interest Payable - 2021 = $6653.33 rounded off to 6653

Step-by-step explanation:

The accrual principle in accounting requires the revenue and expenses for a period to be matched and recorded in their corresponding or respective periods. Thus, even though the interest on note will be paid at maturity in 2022, the interest expense related to the month of November 2021 and December 2021 will be recorded in the current year at 31 December as interest payable.

Interest Payable - 2021 = 499000 * 8% * 2/12

Interest Payable - 2021 = $6653.33 rounded off to 6653