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A business receives $210,000 from a bank loan on the balance date of 31 December 2022. The loan has interest payable of 10% per annum and interest is paid twice a year on 30 June and 31 December. What is the interest payable account balance at 30 June 2023?Group of answer choicesNil (i.e., zero balance)$21,000$231,000$10,500

Question

A business receives 210,000fromabankloanonthebalancedateof31December2022.Theloanhasinterestpayableof10210,000 from a bank loan on the balance date of 31 December 2022. The loan has interest payable of 10% per annum and interest is paid twice a year on 30 June and 31 December. What is the interest payable account balance at 30 June 2023?Group of answer choicesNil (i.e., zero balance)21,000231,000231,00010,500

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Solution

The interest payable account balance at 30 June 2023 can be calculated as follows:

  1. Identify the principal amount of the loan, which is $210,000.

  2. Identify the annual interest rate, which is 10%. However, since interest is paid twice a year, we need to divide this annual rate by 2 to get the semi-annual rate. So, the semi-annual rate is 10% / 2 = 5%.

  3. Calculate the interest for the period from 31 December 2022 to 30 June 2023. This is done by multiplying the principal amount by the semi-annual interest rate: 210,000∗5210,000 * 5% = 10,500.

So, the interest payable account balance at 30 June 2023 is $10,500.

This problem has been solved

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