Question

On december 1, victoria company signed a 90-day, 6% note payable, with a face value of $15,000. what amount of interest expense is accrued at december 31, the company's year end, on the note? (use 360 days a year.)

Answer 1

At the end of a full year (360 days), the note will have a total value of (15000 * 1.06), or $15,900. This gives an interest amount of $900. Dividing this by 12 months gives the per-month rate. (900 / 12) = $75, which would be the amount of interest accrued by December 31 on this note.