Use the following information for questions:
Cartage Co.signed a $17,000, six-month note on October 1, 2011.Principal and interest are due at maturity.The interest rate is 6%.
-The total liability reflected on the December 31 balance sheet related to this note would be closest to?
A)$17,000
B)$17,085
C)$17,255
D)$18,020

Question

Quizplus · Accepted Answer

To calculate the total liability reflected on the December 31 balance sheet, we need to first calculate the interest expense for the two months from October 1 to December 31.

Interest expense = Principal x Rate x Time
Time = 2/12 years (since there are 2 months in this period out of a total of 12 months)

Interest expense = $17,000 x 0.06 x (2/12) = $170

Therefore, the total liability reflected on the December 31 balance sheet would be:

Principal + Interest = $17,000 + $170 = $17,170

However, since the question asks for the amount closest to the answer, the best choice is C) $17,255, which is the nearest option to $17,170.

Use the Following Information for Questions