Question

On October​ 1, 2019, Fashion Jewelers accepted a​ 5-month, 11% note for​ $7,500 in settlement of an overdue account receivable. The accounting period ends on December 31. Calculate the accrued interest on the note at December​ 31, 2019.​ (Round any intermediate calculations to two decimal​ places, and your final answer to the nearest​ dollar.)

Answer 1

Answer:

The accrued interest on the note at December​ 31, 2019 is $206.25

Explanation:

Fashion Jewelers accepted a​ 5-month, 11% note for​ $7,500.

The amount of interest for 1 year = 11% x $7,500 = $825

The amount of interest for 1 month = $825/12 = $68.75

From October​ 1, 2019 to  December 31, 2019, Fashion Jewelers has accepted the note for 3 months.

The accrued interest on the note at December​ 31, 2019 = $68.75 x 3 = $206.25