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 Mar 25, 2021

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.

a. $0
b. $25
c. $50
d. $75
e. $300

Expert Solution

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

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