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Homework answers / question archive / On December 1, Martin Company signed a $5,000, 3-month, 6% note payable, with the principle plus interest due on March 1 of the following year

On December 1, Martin Company signed a $5,000, 3-month, 6% note payable, with the principle plus interest due on March 1 of the following year

Finance

On December 1, Martin Company signed a $5,000, 3-month, 6% note payable, with the principle plus interest due on March 1 of the following year. What amount of interest expense is accrued at December 31 on the note.

  1. a. $0
  2. b. $25
  3. c. $50
  4. d. $75
  5. e. $300

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Answer:

b . $ 25

Step-by-Step explanation

Total interest Exp. = Note payable * Int. rate * Due month

                               = $5,000 * 6% * 3/12

                               = $75

Accrued int. exp. as on Dec. 31 = $75 * 1/3

                                               = $25