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 on the note? (Use 360 days a year.)

Answer 1

Answer:

The $75 amount of interest expense is accrued at December 31 on the note.

Explanation:

The interest expense amount which is accrued at December 31 is shown below:

= Face value ×  interest rate × months ÷ total number of months

= $15,000 × 6% × 1 ÷ 12

= $75

where,

total number of months is 12 in a year

And, for 1 month we have to compute the accrued interest expense. The one month is calculated from December 1 to December 31.

We don't recognized the signed days as we have to compute the interest expense till December 31. That's why we ignored this part.

Thus, the $75 amount of interest expense is accrued at December 31 on the note.