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On September 1, 2020, Vaughn Manufacturing issued a note payable to National Bank in the amount of $1500000, bearing interest at 8%, and payable in three equal annual principal payments of $510000. On this date, the bank's prime rate was 7%. The first payment for interest and principal was made on September 1, 2021. At December 31, 2021, Vaughn should record accrued interest payable of:

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Answer:

Interest payable is equal to $11500

Explanation:

Amount payable to national bank on September 1,2020 is $1500000.

Amount is paid in three equal amount of $510000.

Therefore amount remaining on 31th December = $1500000 -$510000 = $4950000

Rate of interest = 7%

Total number of month from September to December = 4

So interest payable = [tex]=\frac{4950000\times 4\times 7}{12\times 100}=115500[/tex] $

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