Question

On October 1, 2012, Vero Beach Financial lent Morgan Corporation $600,000, receiving in exchange a nine-month, 12% note receivable. Vero Beach Financial ends its fiscal year on December 31 and makes adjusting entries to accrue interest earned on all notes receivable. The interest earned on the note receivable from Morgan Corporation during 2013 will amount to:_______

Answer 1

$36,000

Step-by-step explanation:

Data provided as below:-

Received amount = $600,000

Notes receivable percentage = 12%

Receiving in exchange = Nine-month

From 1 Oct to 31 Dec = 3 Months

The computation of interest earned is shown below:-

Interest Earned = Received amount × Notes receivable percentage × Number of months

= $600,000 × 12% × 6 ÷ 12

= $600,000 × 12% × 0.5

= $36,000

So, we have applied the above formula to compute the interest earned.