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On September 1, 2020, Lowe Co. issued a note payable to National Bank in the amount...

On September 1, 2020, Lowe Co. issued a note payable to National Bank in the amount of $1,500,000, bearing interest at 9%, and payable in three equal annual principal payments of $500,000. On this date, the bank's prime rate was 8%. The first payment for interest and principal was made on September 1, 2021. At December 31, 2021, Lowe should record accrued interest payable of

a. $45,000.

b. $40,000.

c. $30,000.

d. $25,000.

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Answer #1

Answer c.$30,000

{$1,000,000 X 9%} X 4/12

= $30,000

Interest for 4 months ( Sep - Dec 2021) has been calculated on remaining $1million

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