Question

On August 2, Jun Company receives a $7,200, 90-day, 12.5% note from customer Ryan Albany as payment on his $7,200 account receivable. What is the interest earned by Jun Company on this note?

1) $90
2) $180
3) $360
4) $720

Answer 1

The interest earned by Jun Company on the note is approximately $220.45.

Step-by-step explanation:

To calculate the interest earned by Jun Company on the note, we need to use the formula:

Interest = Principal * Rate * Time

Here, the Principal is the amount of the note, which is $7,200, the Rate is given as 12.5% per year, and the Time is 90 days.

First, we need to convert the Time to years. There are 365 days in a year, so 90 days is equal to 90/365 = 0.2466 years (approximately).

Plugging the values into the formula:

Interest = $7,200 * 0.125 * 0.2466 = $220.45 (approximately)

Therefore, the interest earned by Jun Company on this note is approximately $220.45.