Question

On September 1, Year 1, Dallas Corporation accepts a $30,000 six-month, 12 percent promissory note from one of its clients. The year-end adjustment to accrue interest revenue on December 31, Year 1 will include a _____.

Answer 1

Answer:

$1,200

Explanation:

Since the promissory note is accepted by Dallas Corporation for the period of only four months in the Year 1 i.e. from the September 1, Year 1 to December 31, Year 1, therefore the interest revenue will be accrued for the period of four months which shall be calculated using the below mentioned equation:

Interest revenue=Promissory note amount*interest rate*4/12

                            =$30,000*12%*4/12

                            =$1,200