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
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.
