Universal Travel Inc. borrowed $500,000 on November 1, 2021, and signed a 12-month note bearing interest at 6%. Interest is payable in full at maturity on October 31, 2022. In connection with this note, Universal Travel Inc. should report interest payable at December 31, 2021, in the amount of: (Round your final answers to the nearest whole dollar.

Answer: $5,000

Explanation:

Since 6% interest is to be paid on the borrowed amount of $500,000.

Therefore,

Total interest payable on $500000 is:

$500000 * (60/100) = $30,000

Then, the payable interest for

One month is:

$30,000 : 12 = $2,500

Since the period between November 1, 2021 and December 31, 2021 is two (2) month intervals.

Then, 2 month interest is to be reported by Universal Travel Inc.

Therefore,

$2,500 * 2 = $5,000