Question

On November 1, 2021, Tim's Toys borrows $30,600,000 at 7% to finance the holiday sales season. The note is for a six-month term and both principal and interest are payable at maturity. What is the balance of interest payable for the loan as of December 31, 2021?

Answer 1

$357,000

Step-by-step explanation:

The Interest payable which shall be recognised by the Tim's Toys in its accounts as at December 31,2021 in respect of the amount borrowed on the November 1, 2021 is given below:

Interest payable=Amount borrowed*interest rate*2/12

In the given question

Amount borrowed= $30,600,000

Interest rate=7%

2/12 represents the months for which the loan was outstanding during the year i.e from November 2021 to December 2021.

Interest payable=$30,600,000*7%*2/12=$357,000