Question

On September 1, 2020, Vaughn Manufacturing issued a note payable to National Bank in the amount of $1440000, bearing interest at 9%, and payable in three equal annual principal payments of $550000. On this date, the bank's prime rate was 8%. The first payment for interest and principal was made on September 1, 2021. At December 31, 2021, Vaughn should record accrued interest payable of___________.

Answer 1

Answer:

$28,800

Explanation:

I will just assume that there are three equal annual principal payments of $480,000. If we use $550,000, the total principal would = $1,650,000.

accrued interests from September to December = principal x (9%/12) x 4 months

principal = $480,000 x 2 = $960,000

accrued interest payable  = $960,000 x 0.75% x 4 = $28,800