Abardeen Corporation borrowed $75,000 from the bank on October 1, 2016. The note
ID: 2560082 • Letter: A
Question
Abardeen Corporation borrowed $75,000 from the bank on October 1, 2016. The note had an 6 percent annual rate of interest and matured on March 31, 2017. Interest and principal were paid in cash on the maturity date.
What amount of interest expense was recognized on the 2016 income statement? (Do not round intermediate calculations. Round your answer to the nearest dollar amount.)
What amount of total liabilities was reported on the December 31, 2016, balance sheet? (Do not round intermediate calculations. Round your answer to the nearest dollar amount.)
What total amount of cash was paid to the bank on March 31, 2017 for principal and interest?
What amount of interest expense was reported on the 2017 income statement? (Do not round intermediate calculations. Round your answer to the nearest dollar amount.)
Abardeen Corporation borrowed $75,000 from the bank on October 1, 2016. The note had an 6 percent annual rate of interest and matured on March 31, 2017. Interest and principal were paid in cash on the maturity date.
Explanation / Answer
A. What amount of cash did Abardeen pay for interest in 2016 is Zero because the Interest and principal were paid in cash on the maturity date that is March 31, 2017.
B. What amount of interest expense was recognized on the 2016 income statement is as follows.
= ($ 75,000 * 6/100) * 3/12
= $ 1,125
C. What amount of total liabilities was reported on the December 31, 2016, balance sheet.
Loan Amount = $ 75,000
Accrued Interest = $ 1,125
So Total Liablities to be reported on the December 31, 2016 = $ 76,125
D. What total amount of cash was paid to the bank on March 31, 2017 for principal and interest.
Total amount Payable on March 31,2017 = Loan Amount + Interest
= $ 75,000 + $ 2,250 [( $ 75,000 * 6/100)*6/12]
= $ 77,250
E. What amount of interest expense was reported on the 2017 income statement
= ($ 75,000 * 6/100) * 3/12
= $ 1,125 (From January 1, 2017 To March 31,2017)
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