Question

On October 1, Black Company receives a 10% interest-bearing note from Reese Company to settle a $22,200 account receivable. The note is due in six months. At December 31, Black should record interest revenue of

Answer 1

Answer:

$555

Explanation:

The computation of the interest revenue is shown below:

= Account receivable  × rate of interest × number of months ÷ (total number of months in a year)

= $22,200 × 10% × (3 months ÷ 12 months)

= $2,220 × (3 months ÷ 12 months)

= $555

The three month is calculated from October 1 to December 31. The six month period of note is ignored