Answer:
Radon Express
$ 48,000, 90 days, 8% note
To simplify interest computation a year is commonly treated as having 360 days ( called the banker's rule).
Interest= Principal of the interest * annual Interest rate* time in years
Interest= $ 48,000* 8% * 90/360
Interest = $ 48,000* 0.08 *1/4= $ 960
The amount due on the dishonored note plus interest= $ 48,000 + 960=
$ 48,960
10 % of $ 48,960= $ 4896
The entry on 21st oct would be
Cash $ 53856 Dr.
Interest Revenue $ 4896 Cr
Interest Receivable $ 960 Cr
Notes Receivable $ 48,000 Cr
The $ 4896 interest earned reflects the Randon's Revenue from holding the note from 21st Sept to 21st Oct.
