Question

On February 1, Ville Company received a $6,000, 5%, four-month note receivable. The cash to be received by Ville Company when the note becomes due is

A) $100.
B) $6,000.
C) $6,100.
D) $6,300.

Answer 1

The cash to be received by Ville Company when the note becomes due is $6,100.

Step-by-step explanation:

The cash to be received by Ville Company when the note becomes due can be calculated using the formula for future value of a single sum:

Future Value = Principal x (1 + Interest Rate x Time)

In this case, the principal is $6,000, the interest rate is 5%, and the time is four months. Converting four months to a fraction of a year, we have:

Time = 4/12 = 1/3

Plugging in the values into the formula:

Future Value = $6,000 x (1 + 0.05 x 1/3)

Future Value = $6,100

Therefore, the cash to be received by Ville Company when the note becomes due is $6,100. Option C is correct.