Question

A customer takes out a loan of $\$ 130,000$ on January 1 , with a maturity date of 36 months, and an annual interest rate of 11$\% .$ If 6 months have passed since note establishment, what would be the recorded interest figure at that time? A. $\$ 7,150$ B. $\$ 65,000$ C. $\$ 14,300$ D. $\$ 2,383$

Name: Problem 21, Chapter 9: Principles of Accounting Volume 1: Financial Accounting
Uploaded: 2020-05-20T08:24:10-08:00
Duration: 4 min 56 s
Channel: Puneet Prajapati
Description: A customer takes out a loan of 130,000 on January 1 , with a maturity date of 36 months, and an annual interest rate of 11% . If 6 months have passed since note establishment, what would be the recorded interest figure at that time? A. 7,150 B. 65,000 C. 14,300 D. 2,383

   A customer takes out a loan of $\$ 130,000$ on January 1 , with a maturity date of 36 months, and an annual interest rate of 11$\% .$ If 6 months have passed since note establishment, what would be the recorded interest figure at that time?
A. $\$ 7,150$
B. $\$ 65,000$
C. $\$ 14,300$
D. $\$ 2,383$

Principles of Accounting Volume 1: Financial Accounting

Mitchell Franklin,… 1st Edition

Chapter 9, Problem 21

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Solved by Expert Puneet Prajapati

05/20/2020

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However, we are interested in the interest accrued over a period of 6 months, not a full year. Show more…

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A customer takes out a loan of $\$ 130,000$ on January 1 , with a maturity date of 36 months, and an annual interest rate of 11$\% .$ If 6 months have passed since note establishment, what would be the recorded interest figure at that time? A. $\$ 7,150$ B. $\$ 65,000$ C. $\$ 14,300$ D. $\$ 2,383$

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Key Concepts

Accrued Interest

Accrued interest is the amount of interest that accumulates on a principal balance over a period of time. This concept is used to record interest that has been earned or incurred but not yet paid, typically taking into account the time elapsed relative to the full interest period.

Simple Interest Calculation

Simple interest is calculated using the formula: Interest = Principal × Rate × Time. This approach involves multiplying the original principal amount by the interest rate and the time period as a fraction of one year, ensuring that interest is computed only on the original principal.

Time Period Adjustment

When dealing with interest computations, it is crucial to adjust the annual rate to match the fraction of the year for which the interest is being calculated. This involves converting the given period (such as 6 months) into a fraction of a year, thereby accurately computing the proportional interest for that duration.

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