hy can someone explain t me

CPA-00540 in becker passmaster...y do we take 1320 for the second yr accrued interest i tht it wud be 1320*10/12 ..as its as on dec 31 94...two mnths r remanin after tat jan anf feb 95

From March 1, 1993 the 2 year note payable of $10,000 acruess interest and is not paid until the note matures Feb 28, 1995. Interest is 12% compounded annually. The question is asking for accrued interest LIABILITY, not expense as of Dec. 31, 1994.

So for 1993, the interest expense is $1000. (10,000 * 12%) * 10/12

This leaves over 2 months for 1994. So $200 for 1994. Then, to figure interest expense for 1994. The note now has the principal of 10,000 plus the accrued interest of $1200, so (11,200 * 12%) * 10/12 = 1120.

1120+1200 = 2320. Answer d.