Question

On October​ 1, 2019, Westfield Company sold machinery to a customer for​ $21,000. The customer could not pay at the time of​ sale, but agreed to pay 10 months​ later, and signed a​ 10-month note at​ 12% interest. How much interest revenue was earned during​ 2019? Round any intermediate calculations to two decimal​ places, and your final answer to the nearest dollar.

Answer 1

$630

Step-by-step explanation:

The computation of the interest revenue is shown below:

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

= $21,000 × 12% × (3 months ÷ 12 months)

= $630

The three month is computed from October​ 1 to December 31. We assume the books are closed on December 31

We simply apply the simple interest formula, So that the correct value of interest can be computed

Hence, all the things are considered for the computation part.