On December 11, the G. Baker Corporation purchases $15,000 of equipment by issuing a 30-day, 12% note payable. The amount of accrued interest on December 31 is:
a. $240
b. $160
c. $ 105
d. $ 0
2007-10-02 18:39:29 · 4 answers · asked by Anonymous in Business & Finance ➔ Corporations
$15,000 x 12% = $1,800 interest per year
Dec 11 to Dec 31 is 21 days (both days inclusive)
21/365 x 1800 = 103.5616, so I guess the answer is (c)
2007-10-03 01:02:02 · answer #1 · answered by Sandy 7 · 0⤊ 0⤋
Interest on a short-term note is calcualted as Principal x rate x time. The interest rate and time have to be expressed in similar terms. That is, if the rate is annual, time has to be in annual terms also. Interest on a note is typically expressed in annual terms. In your case, time consists of 20 days out of one year. It is common in business to assume the year has 360 days. This is because calculations, that once had to be done manually, were easier to make with 360 rather than 365.
$15,000 x .12 x 20/360 = $100
$15,000 x .12 x 20/365 = $98.63
None of the available answers is correct. The total interest on the note for 30 days is $150 and by December 31 only 2/3 of the interest expense has been incurred. If this is a multiple choice question in a test, the teacher has earned an F.
2007-10-02 23:12:25 · answer #2 · answered by Anonymous · 0⤊ 0⤋
C. 1% per month of a $15,000 note is $150 per month.
2007-10-02 18:47:37 · answer #3 · answered by California Boy 4 · 0⤊ 0⤋
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2016-12-28 12:16:22 · answer #4 · answered by luby 4 · 0⤊ 0⤋