6 Derry Corp issued a 10 note payable in the amount of 36 mi

6. Derry Corp issued a 10% note payable in the amount of $3.6 million on October 1, 2017. The note is payable in three equal annual payments of $1.2 million plus interest. The first interest and principal payment was made on October 1, 2018. Derry\'s fiscal year end is June 30h, On Derry\'s balance sheet at June 30, 2019, what amount should be reported as Interest Payable for this note?

Solution

Solution:

Value of note payable= $3.6 million

First installment amount as on October 1, 2018= $1.2 million + 10% Interest on $3.6 million

Balance Note Payable as on October 1,2018= $3.6 million - $1.2 million= $ 2.4 million

Interest payable as at June 30, 2019= $2,400,000 * 10%* 9/12 = $ 180,000

Therefore interest payable will be reported in balance sheet is equal to $180,000