Question

Giorgio Italian Market bought $5,600 worth of merchandise from Food Suppliers and signed a 90-day, 10% promissory note for the $5,600. Food Supplier's journal entry to record the collection on the maturity date is: (Use 360 days a year.)

Answer 1

The question involves calculating the interest on a promissory note and determining the journal entry for the collection of the amount due at maturity. The interest is calculated based on a principal of $5,600 at a 10% annual rate over a 90-day period, resulting in $140 of interest and a total amount due of $5,740.

Step-by-step explanation:

The scenario described in the question relates to a promissory note transaction between Giorgio Italian Market and Food Suppliers. Giorgio Italian Market has purchased merchandise and has agreed to pay the sum of $5,600 back to Food Suppliers in 90 days with a 10% interest using a promissory note. To address this question, we need to calculate the interest accrued and the total amount due on the maturity date, considering a 360-day year for simplicity in interest calculation.

To calculate the interest: Interest = Principal × Rate × Time = $5,600 × 10% × (90/360) = $140.

So, the total amount due on the maturity date would be the principal plus interest: Total Amount = Principal + Interest = $5,600 + $140 = $5,740.

Therefore, Food Supplier's journal entry to record the collection on the maturity date will debit Cash for $5,740, credit Notes Receivable for $5,600, and credit Interest Revenue for $140.

Answer 2

Answer: $5,740

The amount to be recorded by the food supplier after 90 days is $5,740

Step-by-step explanation:

By using the formula

A = p + prt

A = future amount ( amount due on a debt)

p= principal / present value=$5,600

r = interest rate = 10% = 0.1

t = time in year. Convert 90days to Yr..( 60/360) = 0.25yrs

A= p+prt = p(1 + rt)

A = 5600 [1 + (0.1 × 0.25)]

A = 5600 [1 + 0.025]

A = 5600 (1.025)

A = $5,740.

The amount that would be returned after 90 days at 10% interest rate is $5,740.