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On November 1,Year 1,Noble Co.borrowed $80,000 from South Bank and signed a 12%,six-month note payable,all due at maturity.The interest on this loan is stated separately.
-At December 31,Year 1,Noble Co.'s overall liability for this loan amounts to:
A)$80,000.
B)$81,600.
C)$83,200.
D)$84,800.

Question

Quizplus · Accepted Answer

The interest expense for the two months (November and December) is ($80,000 x 12% x 2/12) = $1,600. Therefore, the overall liability for the loan at December 31, Year 1 is $80,000 (principal) plus $1,600 (interest expense) = $81,600.

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