Question

QS 9-4 Interest-bearing note transactions LO P1 On November 7, 2017, Mura Company borrows $190,000 cash by signing a 90-day, 12% note payable with a face value of $190,000. (Use 360 days a year. Do not round your intermediate calculations.) 1. Compute the accrued interest payable on December 31, 2017.

Answer 1

Answer:

The accrued interest payable  on December 31, 2017 is $15,453.33.

Explanation:

When Mura Company signs a 90-day, 12% note payable the entries are as follows :

Cash $190,000 (debit)

Note Payable $190,000 (credit)

On December 31, 2017 when Interest acrues on the loan the entries are as follows :

Note : Two months interest or 61 days interest would have expired

Interest Expense $15,453.33 (debit)

Note Payable $15,453.33 (credit)

Interest expense = $190,000 × 12% × 61/90

                            = $15,453.33

Conclusion :

The accrued interest payable  on December 31, 2017 is $15,453.33.