Asked by Justice Kay-Lease on May 07, 2024
Verified
On October 1, Black Company receives a 9% 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) $450
C) $900
D) $1,800
Interest-bearing Note
An interest-bearing note is a debt instrument in which the borrower agrees to pay the lender interest in addition to repaying the principal amount borrowed.
Interest Revenue
Income earned on investments like bonds, savings accounts, and other interest-bearing securities.
Note Duration
The length of time until a note payable or receivable is due, which determines its repayment schedule.
- Determine and log the interest earned on notes receivable.
Verified Answer
ZK
Zybrea KnightMay 08, 2024
Final Answer :
B
Explanation :
Interest revenue is calculated based on the principal amount, the annual interest rate, and the time period the note has been outstanding. Since the note is for 6 months at a 9% annual rate, for 3 months (October 1 to December 31), the interest revenue is $20,000 * 9% * (3/12) = $450.
Learning Objectives
- Determine and log the interest earned on notes receivable.