On November 1, year 1, ABC, Inc., received a 3-month, 8%, $1,500 note receivable with interest and principal to be collected on February 1 of year 2. What is the amount of interest revenue that should be recorded for year 1

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Business

Holly Clay

13 March, 05:13

On November 1, year 1, ABC, Inc., received a 3-month, 8%, $1,500 note receivable with interest and principal to be collected on February 1 of year 2. What is the amount of interest revenue that should be recorded for year 1

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Answers (1)

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Greyson Zuniga · Answer 1

The amount of interest revenue that should be recorded for year 1 is $20.

Explanation:

A note otherwise known as promissory note is an unconditional written promise by a borrower to a lender (payee) to pay a certain agreed sum at a specific date. The interest revenue on notes receivable is calculated by Principal x Interest rate x Time period In the case of ABC, Inc., the interest revenue to be recorded for year 1 (November 1 - December 31) is calculated as follows: $1,500 x 8%/12 = $10 monthly. For the 2 months, it is $10 x 2 months = $20.