Question

On June 8, Alton Co. issued an $88,500, 7%, 120-day note payable to Seller Co. Assume that the fiscal year of Seller Co. ends June 30. Using a 360-day year in your calculations, what is the amount of interest revenue recognized by Seller in the following year? When required, round your answer to the nearest dollar.

Answer 1

Amount of interest revenue recognized
`=(2065* 98)/(120)=$1686.41`

Step-by-step explanation:

Principal amount P = $88500

Rate of interest r = 7 %

Total number of days = 120

So interest
`=(principal\ amount* rate* time)/(100)=(88500* 7* 120)/(360* 100)=$2065`

Number of days from 8 june to 30 june = 30-8 = 22 days

So left days = 120-22 = 98 days

So amount of interest revenue recognized
`=(2065* 98)/(120)=$1686.41`