Question

Marsh Corporation borrowed $90,000 by issuing a 12%, six-month note payable, all due at the maturity date. After one month, the company's total liability for this loan amounts to:

a. $90,450
b. $90,000
c. $90,900
d. $91,800

Answer 1

Answer:

The correct answer is C

Explanation:

The total liability for the loan is computed as:

Total liability of the loan = Loan amount + Loan amount × Rate × 1 month / Number of months

where

Loan amount is $90,000

Rate is 12%

Putting the values above:

Total liability of loan = $90,000 + $90,000 × 12%  1/ 12

Total liability of loan = $90,000 + $900

Total liability of loan = $90,900

Therefore, the aggregate liability for the loan amounts to $90,900