On October 1, Black Company receives a 6% interest bearing note from Reese Company to settle a $20,000 account receivable. The note is due in six months. At December 31, Black should record interest revenue of:

A. $0

B. $300

C. $600

D. $1,200

B. $300

Explanation:

The interest revenue is computed below:

= Principal * rate of interest * number of months : (total number of months in a year)

= $20,000 * 6% * (3 months : 12 months)

= $300

The 6 months is calculated from October 1 to December 31

Simply we use the simple interest formula by considering the principal amount, rate of interest and time period so that the correct revenue can be computed