Question

On December 1, 2021, Old World Deli signed a $300,000, 5%, six-month note payable with the amount borrowed plus accrued interest due six months later on June 1, 2022. Old World Deli records the appropriate adjusting entry for the note on December 31, 2021. What amount of cash will be needed to pay back the note payable plus any accrued interest on June 1, 2022

Answer 1

$307,500

Step-by-step explanation:

The computation of the amount needed to pay back the note payable plus any accrued interest is shown below

= Note payable amount + note payable amount × rate of interest × number of months ÷ total number of months in a year

= $300,000 + $300,000 × 5% × 6 months ÷ 12 months

= $300,000 + $7,500

= $307,500

Therefore, the amount needed to pay back is $307,500