Question

On June 8, Alton Co. issued an $88,500, 7%, 120-day note payable to Seller Co. Assume that the fiscal year of Seller Co. ends June 30. Using a 360-day year in your calculations, what is the amount of interest revenue recognized by Seller in the following year? When required, round your answer to the nearest dollar.

Answer 1

Answer:

Amount of interest revenue recognized $=\frac{2065\times 98}{120}= 1686.41$

Explanation:

Principal amount P = $88500

Rate of interest r = 7 %

Total number of days = 120

So interest $=\frac{principal\ amount\times rate\times time}{100}=\frac{88500\times 7\times 120}{360\times 100}= 2065$

Number of days from 8 june to 30 june = 30-8 = 22 days

So left days = 120-22 = 98 days

So amount of interest revenue recognized $=\frac{2065\times 98}{120}= 1686.41$