A business receives $210,000 from a bank loan on 1 January 2023. The loan has interest payable of 10% per annum and interest is paid twice a year on 1 July and 1 January, with the first payment due 1 July 2023. What is the interest payable account balance at 30 June 2023?
Question
A business receives $210,000 from a bank loan on 1 January 2023. The loan has interest payable of 10% per annum and interest is paid twice a year on 1 July and 1 January, with the first payment due 1 July 2023. What is the interest payable account balance at 30 June 2023?
Solution
The interest payable on the loan is calculated as follows:
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Determine the annual interest: The annual interest on the loan is calculated by multiplying the loan amount by the interest rate. In this case, 21,000.
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Determine the semi-annual interest: Since interest is paid twice a year, we need to divide the annual interest by 2. So, 10,500.
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Determine the interest payable at 30 June 2023: Since the first payment is due on 1 July 2023, the interest payable at 30 June 2023 is the semi-annual interest, which is $10,500.
So, the interest payable account balance at 30 June 2023 is $10,500.
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