Question

On February 1, 2015, Sanger Corp. lends cash and accepts a $8,500 note receivable that offers 12% interest and is due in six months. What would Sanger record on August 1, 2015, when the borrower pays Sanger the correct amount owed? (Do not round intermediate calculations.)

Cash 9,010
Interest Revenue 340
Notes Receivable 8,670
Cash 8,500
Notes Receivable 8,500
Cash 9,010
Interest Revenue 510
Notes Receivable 8,500
Cash 9,010
Notes Receivable 9,010

Answer 1

Cash 9,010

Interest Revenue 510

Notes Receivable 8,500

Step-by-step explanation:

The journal entry is shown below:

Cash A/c Dr 9,010

To Interest Revenue A/c Dr $510

To Notes Receivable A/c Dr 8,500

The computation of the interest revenue is shown below:

= Principal × rate of interest × number of months ÷ (total number of months in a year)

= $8,500 × 12% × (6 months ÷ 12 months)

= $510

The six months is calculated from February 1 to August 1