On September 1, 2010, Herman Co. issued a note payable to National Bank in the amount of $1,200,000, bearing interest at 12% and payable in three equal annual principal payments of $400,000. On this date, the bank's prime rate was 11%. The first payment for interest and principal was made on September 1, 2011. At December 31, 2011, Herman should record accrued interest payable of