Question

On december 1, 2015, parsons inc. sold machinery to a customer for $20,000. the customer could not pay at the time of sale, but agreed to pay 9 months later, and signed a 9-month note at 9% interest. how much interest revenue was earned during the year 2016?

Answer 1

The question asks for the interest revenue earned during 2016. Though parsons inc. gets interest for 9 months, only 8 months interest will be credited to interest revenue for 20126. One months interest, that of December 2015) will be credited to the interest revenue of 2015.
So the interest earned during 2016 = $20,000 x 9/100 x 8/12
= $1200
9/100 is 9% interest and 8/12 is 8 months out of 12 months.