Question

Montana Furniture Mart sold $120,000 of furniture on June 30 and accepted the customer's $120,000 10% 1-year note payable in exchange. Montana Furniture Mart would record ___ for interest on December 31 assuming that 10% approximates the market rate of return.

Answer 1

Answer:

$6,000

Explanation:

Data given in the question

Sale value of the furniture = $120,000

Interest rate = 10%

So by considering the above information, the interest recorded is

= Sale value of the furniture × interest rate × number of months ÷ total number of months in a year

= $120,000 × 10% × 6 months ÷ 12 months

= $6,000

The six months is calculated from June 30 to December 31 and we considered the same for the above calculation