A $75,000 note payable carries 8% annual interest. One month of interest has accrued but is unpaid. What interest expense should be recorded?
Correct Answer
C) $500
One month of interest is principal times annual rate divided by 12.
Why This Is the Correct Answer
One month of interest is principal times annual rate divided by 12.
Why the Other Options Are Wrong
Option A: $400
$400 is below the supported result for accrued interest expense; it likely uses the wrong base, period, or account bucket.
Option B: $450
$450 is below the supported result for accrued interest expense; it likely uses the wrong base, period, or account bucket.
Option D: $600
$600 is above the supported result for accrued interest expense; it likely adds an unsupported amount or compares the wrong financial base.
Memory Technique
Records Monthly money test: bucket before math for accrued interest expense.
Reference Hint
Open-book path: tab Builder's Guide to Accounting, 2001 to Section Three, Recording After the Event, Accrued Expenses; use the job ledger figures in the stem and recompute the same accounting measure.
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