Question

On November 1, 2021, New Morning Bakery signed a $191,000, 6%, six-month note payable with the amount borrowed plus accrued interest due sik months later on May 1, 2022 New Morning Bakery 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 May 1, 2022? (Do not round your intermediate calculations.) eBook Multiple Choice $195,775. $196,730. $191,955 $191,000

Answer 1

Answer:

$196,730

Explanation:

The note payable signed has an interest rate of 6% per year. Since the amount is paid back in 6-months, only half a period should be considered when calculating interests due. The total amount that New Morning Bakery should pay back on May 1, 2022 is given by:

$A =\ 191,000*(1+(0.06*0.5))\\A=\ 196,730$

The company will need to pay $196,730.